Getting a life insurance policy is like paying for peace of mind. Many people see life insurance as a worthwhile investment to ensure their family’s financial security. However, picking the right insurance plan might be more stressful than you expect.
If your financial planner suggests life insurance, it may seem like an obvious choice. With so many life insurance types, you may feel confused about which plan is right for you. Before you commit, it’s important to understand different life insurance types to see which policy best matches your goals.
Not sure where to begin? We’ve got you covered. Read on to learn about the two main kinds of life insurance and find which one is right for you.
Term Life Insurance
If you want to protect your family in the case of your untimely death, term life insurance may be a good fit. Term life insurance is typically available for 10, 20, or 30-year terms. This makes term life insurance a good option for those who are the main breadwinner and have children living at home.
Term life insurance works like a home or auto policy. In the case of an emergency, your policy will pay out the coverage amount to your family. However, the policy does not retain any cash value after the term ends.
The low monthly costs of term life insurance may make it a worthwhile choice to protect your family if you die. If you’re looking for a lifelong policy or an investment avenue, whole life insurance may be better for you.
Whole Life Insurance
If you’re working with a financial advisor, they may recommend that you purchase whole life insurance. Whole life insurance is a more expensive monthly investment than term life insurance, but it can also be used in circumstances other than your death.
For example, your whole life insurance payments retain cash value that you can borrow against in the future. The whole life cash value can be used as emergency savings or be used as an asset to borrow against, like your home.
Whole life insurance can also be used as a high-yield savings account. When you create your policy, you can choose a fixed or variable interest rate to help your money grow. Some of the money you invest in your whole life insurance policy goes toward the premium, while some money adds to the policy’s cash value.
Whole life insurance is best as an addition to a full financial portfolio. Speak with your trusted financial advisor to see if whole life insurance is right for you.
Choosing Between Types of Life Insurance
Committing to a life insurance plan can be a tough decision. It’s important to understand your goals and your overall financial plan to suitably prepare for the worst. Understanding the different types of life insurance can help you make an informed decision to protect your family.
Looking for more financial advice? You’re in luck! Check out our other blog posts to help you feel more confident in your financial decisions.