Life insurance is an agreement between the policyholder and the provider, where the former agrees to pay a specified sum of money known as a premium throughout the policy’s term. These premiums are paid in exchange for a lump sum of money, known as a death benefit which will be paid to the beneficiaries of the policy at the policyholder’s death.
Different Types of Life Insurance
There are two main types of life insurance. They are:
Term Life Insurance
This is the simplest form of life insurance. With this policy, the insured is covered for a specific time, and if they die during the policy term, their beneficiaries are entitled to the death benefit. This policy usually spans from one to thirty years.
Term life insurance is ideal for you if
1. You have young children, and you want to secure their future should anything happen to you.
2. You want to repay a loan at a particular time.
3. You have limited income and can’t afford permanent life coverage.
Note that you can renew your term policy after its expiry. However, you may be charged higher premiums than before. Note that, unlike a whole life policy, you will not be able to build equity in the form of cash savings.
Whole Life or Permanent Insurance
This policy covers the insured throughout their lifetime, provided they continue to pay their premiums up until the time of their death.
Whole life insurance is ideal for you if
1. You prefer a policy that will cover you throughout your lifetime. Whole life insurance does not have a set period of coverage, thus ensuring that you and your loved ones are protected at all times.
2. You wish to build equity in the form of cash savings. This policy will let you accumulate a savings element that will grow on a tax-deferred basis. You can borrow from these funds and use them for various purposes.
For example, you can use these savings to pay premiums if you are facing problems in keeping up with them.
Note that if the insured dies before repaying the borrowed amount, it will be deducted from the death benefit, and the beneficiaries will be paid what is left.
There are pros and cons to both types of life insurance. For permanent coverage, you may be charged up to four times higher than term life insurance. However, with a whole life policy, you can rest assured of being covered throughout your life.
If you have any additional questions about life and personal insurance, contact our experts at Gant Insurance Agency in McKinney, Texas. We are ready to help you with all your coverage needs today.