Life Insurance: Which Type Is Best for You?

One of the hardest challenges in buying a life insurance policy is choosing which type to purchase. To smooth your decision-making process, here’s a guide to help you in deciding which life insurance is best for you:

Two Major Categories of Life Insurance

While there are various types of life insurance, all policies can be classified into two main categories—term life insurance and whole life insurance. The major difference between them is that with term life insurance, you will be covered for only a certain period. On the other hand, with whole life insurance, your policy will not expire. Here’s a more detailed explanation of the two:

Term Life Insurance

Term life insurance policies are considered the most affordable type of life insurance. With term life insurance, you purchase a policy that will run for 10, 20, or 30 years.

If you die within the insurance period, your insurance company will pay your beneficiaries a death benefit. And if by the end of your contract, you’re still alive and well, you can either choose to renew your policy for another period or quit having life insurance.

Term life insurance is a great option for people who want to be insured but can’t afford to pay high monthly premiums. However, if you are considering this type of insurance, keep in mind that you will likely pay a higher premium every time you renew your contract. This is because as people age, they are more likely to develop health problems, and insurance companies often charge them higher rates.

Whole Life Insurance

Whole life insurance is a type of permanent life insurance that lasts for a lifetime or for as long as you can pay your premium. The key aspect of whole life insurance is that it goes beyond providing a death benefit to your beneficiaries at the time of your passing. It also includes an investment-like, tax-deferred savings account called cash value.

While your policy serves its main purpose–to give your beneficiaries a death benefit once you pass away, it also enables you to save money. And the amount invested in your cash value also goes up as you age. Because whole life insurance doesn’t require a contract renewal, your premium will remain the same as when you purchased it.

So, if your policy costs $4,000 when you bought it when you were 30, by the time you reach 65, you will still only pay $4,000. The good thing about whole life insurance is that by the time you’ve retired or stopped working because of an illness, you can use your savings from the cash value to pay for your premiums. This makes whole life insurance best for people who still want to be insured even in their golden years.

However, before you purchase whole life insurance, bear in mind that no matter how much money you have accumulated in your cash value, your beneficiaries will only receive the fixed amount of the death benefit and nothing more. This means that everything you’ve saved in your cash value will be returned to your insurance company.

Talk to Farmers Union Insurance Today

Before purchasing any life insurance, you must be well informed about the policy. At Farmers Union Insurance, we have experienced agents that can help you further understand the different types of life insurance and which one can provide the best death benefit for your beneficiaries. So what are you waiting for? Reach out to us today. We’re looking forward to hearing from you.