How Much Life Insurance Do You Need?
There are a couple of different types of life insurance policies you should familiarize yourself with to decide how much life insurance coverage you need and what is the best life insurance policy for you:
Whole Life Insurance
A whole life insurance policy, as the name suggests, lasts for the entirety of the policyholders ’ life. It comes under the umbrella of permanent life insurance. In the event of your death, your life insurance company will pay a death benefit to your designated beneficiary as long as you kept up your monthly premium payments while you were alive.
Whole life policies are more expensive than other types of policies because a part of your premium payment goes towards your policy while the rest goes towards a cash value account. You can access this account while you’re alive, either by withdrawing from it or by borrowing against it.
Term Life Insurance
Term life insurance policies, unlike permanent policies, only last for a predetermined term ranging from two to 30 years. These policies tend to be more affordable than whole life policies since they don’t have a savings component. However, a term policy still provides a death benefit to your beneficiaries if you pass during the term of your policy. This type of policy is best suited to those with growing families and young kids.
Universal Life Insurance
A universal life policy also falls under the umbrella of permanent life insurance, so it lasts the entirety of your life. Similar to a whole life policy, universal life policies also have a cash-value account, but their prices are lower, similar to those for a term life policy.
Unlike a whole life policy, however, a universal life policy is more flexible, and you’re able to adjust your premium and death benefit throughout your life. One drawback of this type of policy is that the minimum premium you must pay begins to increase as you age, making it less flexible as time goes on.