Life Insurance is often a misunderstood product. It’s more than just a motive for murder in a Hollywood whodunnit. So what is Life Insurance? We all know that it’s meant to provide you money in the event of death, but there’s much more to it than that. In this post we’ll explore the different types of life insurance and what is the best option for you. Think of this as a Life Insurance 101.
Term Life Insurance is a life insurance policy that is set for a specific term for a set amount of monthly payments. This is the Term Life Insurance definition.
You usually purchase a term 10 year or term 20 year policy for a set amount of coverage; let’s say $1 million. If the insured dies during the term, the full amount of the policy - $1million in this case - goes to the named beneficiary. The beneficiary is often the spouse or children, although it can be a business as well.
If the insured does not die during the term, the policy will end and another policy must be purchased, usually for a higher price since the insured is now 10 or 20 years older. The pros of buying term life is that it is the least expensive form of life insurance, especially if you purchase it while young. The cons are that if the term expires you can expect the next term to cost quite a bit more. People often don’t purchase the next term policy and go uninsured, which is less than ideal. We would recommend term life for young people, people on a set budget and people who want the coverage but not an investment.
Whole Life Insurance is a life insurance policy which is guaranteed to remain enforced for the entire life (whole life) of the named insured as long as the premiums are paid.
Premiums are much more expensive than term life for several reasons. This policy is guaranteed to pay out at some point when the insured dies; whereas, term life only pays out if death occurs during the term. Also, whole life insurance policies build a cash value investment which is tax free. Whole life policies may also pay out a cash dividend to the insured. If you have other investments and are looking to diversify, or if you can just afford it, Whole Life Insurance is the way to go.
Critical Illness insurance is an add-on insurance policy after you have purchased Term or Whole Life.
Critical Illness covers you if you become sick with an illness specifically stated within the policy. Most of the major illnesses are covered. This policy coverage is similar to most work benefits packages that cover short- or long-term disability. If you do not have benefits through work, are self employed, or need something specific covered that your current plan does not cover, Critical Illness Insurance is for you.
If you’ve ever owned a home and had a mortgage, you will have been introduced to Mortgage Insurance. Mortgage Insurance covers you in the event of death, the mortgage payments will still be paid. Only the mortgage is covered and nothing else.
The downside to this is that it seems to cover the mortgage company rather than cover you or your family. Instead we recommend buying life insurance with an amount high enough that it will cover your mortgage, death expenses, income and more. Where mortgage Insurance covers only your home, Life Insurance covers your family and all of their interests. The next time you get a mortgage give this some thought.
Guaranteed Life is a form of high-risk life insurance. If you are unable to qualify for a regular Term or Whole Life policy due to medical reasons, then Guaranteed Life is for you. It is called Guaranteed Life because you are guaranteed acceptance without a medical exam. Coverage limits are often very low, $25k for example, and will pay for essentials like death and funeral expenses. Premiums are also quite high. Still, Guaranteed Life fills a need for those who wish not to leave any expenses for loved ones and can’t qualify for regular life insurance.
Today, Life Insurance quotes are easy to obtain online. Most online quotes offer Term 10 Life quotes and can be obtained within minutes. Once you’ve found the right policy and Life Insurance Company for you, the next step is usually a medical exam where you’ll be checked for vitals such as blood pressure and urine sample. Once cleared, your policy will be issued and you can have monthly payments withdrawn from your bank account. Prices can vary quite a bit, so shopping online is definitely advisable.
We hope you’re now more confident about purchasing life insurance. Whether you’re starting a family, a business, or just want a different investment, there will be a Life Insurance policy that will suit your specific needs. At Begin Insurance we have many, many insurance companies and products to suit all of your needs. Give us a call today to speak to a friendly advisor.
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