There are so many reasons to get life insurance. You want to provide for your loved ones after you are gone. Maybe you want your business to keep running after your death, or donate to a cherished cause. Life insurance should help ease your worries, but the process of researching and purchasing life insurance can be confusing and complicated.
Figuring out how much life insurance you need is known in the insurance business as an estimate. For a start, have a seat and ponder over how much insurance you would buy if you didn’t have to worry about the pricetag on it. Now take that idealized insurance idea and look into the market to see how much it would actually cost you. Don’t try to acquire a policy you can’t afford to maintain for the long haul. It’s better to have a slightly cheaper insurance policy that’s there when you intended it to be, than it is to have more expensive life insurance that you have to drop before you pass.
When making a decision about how much insurance you need, start by figuring out how much life insurance you would want to get if cost were not a factor. Think about such factors as funeral costs, what your spouse and children need, and outstanding debts. After coming up with an amount based on those considerations, review price quotes, then balance the amount according to your budget realities. Life insurance is usually one of the first things to get cut in times of personal economic hardship. It is so important to choose a life insurance policy you can really afford, because you need it to be there for your family in case something happens to you.
Whole life, on the other hand, is designed to cover a person until they die, as long as the policy is still viable; that is, as long as you pay the premiums in full and on time. With whole life you can also often pay it up through a certain period, such as ten years. Because this type of policy will inevitably pay out, it’s not as good a risk for the insurance company and will cost a little more than term life, but will never expire, making it worth the extra cost if you can afford it.
These policies aren’t mutually exclusive. You can, if you’re a family man with plenty of responsibilities, take out a long-duration term policy, and then also get a smaller whole life policy as well. This will keep you covered for both the short term in case of disaster and the long term once the term insurance expires.
I recommend that families who have a lot of expenses balance their life insurance by purchasing larger amounts of term life insurance, and a smaller amount of whole life insurance that they can pay up. By doing so, they will still have some whole life insurance after the term life insurance expires.
Universal life insurance is like whole life insurance in that it does not expire as long as the policyholder keeps the policy. It differs from regular whole life insurance in that it places the life insurance and the cash value in separate accounts, whereas regular whole life insurance keeps them together. Largely due to tax considerations, this type of life insurance is attractive to many people as a way to unite life insurance and savings. You can withdraw or borrow against the policy once it accrues enough cash value. You may even see an increase in the face value of the policy. This explanation of universal life insurance is very barebones, since a full explanation of it would require another article.
Susan Reynolds is the webmaster for a leading South African Life Insurance website. For more information visit: http://life.insurance123.co.za/
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