By Arina Smith
Life insurance is one of those things that we all think we might need, but it seems so complicated that many of us just never get around to it. The truth is that the right life insurance can provide you with peace of mind that you won’t find anywhere else. And the good news is that the process of selecting life insurance doesn’t have to be complicated, especially if you work with an insurance agent.
Put together by an insurance agency in Lawton, OK, here is some basic information about life insurance that can help you make a decision about what type of insurance you need and how to get a policy that fits into your budget.
The Basics of Life Insurance
Life insurance can seem complicated, but by understanding exactly what it is and how it works, you may find that it isn’t so complicated after all. First, let’s talk about the two types of life insurance. These are:
Term Life
Term life insurance is in effect for a “term”, or anywhere from 1-30 years. At the end of the term, it expires unless you renew it. There are some benefits to term life insurance, such as cash benefits that are paid to your loved ones. This money is tax-free and can be used to help pay for your final expenses.
Term life insurance policies are generally less expensive than whole life policies. Of course, they are not permanent, so you will have to renew. Depending on the company and your plan, you may be able to convert a term policy to a permanent one.
Permanent
Permanent life insurance policies last, well, permanently. As long as your premiums are paid, you have coverage. There are four different types of permanent life insurance:
- Whole Life: You pay a fixed monthly or annual premium and get a fixed benefit (amount of money paid when you die). Whole life policies also accumulate cash value, which you can cash out during your lifetime.
- Universal Life: You have flexible premiums and benefits. You can change the amount that you pay for coverage if needed. If you change your premium amount, you may also have to change your coverage. Universal life policies often include cash value accumulation.
- Indexed Universal Life: The same benefits and process as universal life, but instead of a fixed rate, the interest rate is based on stock market indexes. That means it could accumulate more or less cash value.
- Variable Universal Life: Offers flexible premiums and death benefits similar to universal life policies. However, it has the performance of an investment account. That means it could accumulate more or less cash value depending on circumstances.
Benefits of Life Insurance
Different types of life insurance offer different benefits in terms of flexibility, premiums and accumulation of cash value. There are, however, some general benefits that you get no matter which type of plan you choose. This comes back to the peace of mind we mentioned earlier.
When you have life insurance, you have peace of mind that certain factors are accounted for upon your death, such as:
- Income for Dependents: Life insurance can help replace income for dependents if the person who died was the primary source of income.
- Paying for Final Expenses: Funeral and burial costs can be very expensive. Life insurance can help pay for these and other estate administration costs, medical expenses, or debts.
- Creating an Inheritance: Want to create a financial inheritance for your heirs? A life insurance policy can help you do that.
- Paying death taxes: Life insurance can help pay for estate taxes so your heirs or beneficiaries do not have to worry about paying taxes.
- Creating a Safety Net: Life insurance policies that accumulate cash value can serve as a sort of savings account. You can borrow on or withdraw from these accounts during your lifetime.
The benefits you receive from your policy will vary depending on the type of plan you choose and your coverage.
Find Out More about Life Insurance
If you want to learn more about life insurance and the best plan for your needs and budget, you may find it helpful to contact an independent insurance agent. An agent can help you assess your goals and find the right plan.
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