Thinking decades ahead is no small feat. Children grow into adults, big purchases include mortgages and marriages, and retirement promises a welcome relief from years of working to build a life full of memories and experiences. How is it possible to estimate one's expenses decades into the future?
Still, planning ahead often pays off, and life insurance is one situation where acting before it's needed is essential. With all the many different types of life insurance policies, it's not always easy to find a life insurance policy; but many eventually find that term life insurance policies are the most cost-effective and comprehensive for an individual's needs.
What is term life insurance?
Term life insurance policies are plans structured over a period of time, whether that spans 10 years or 30. These policies typically require medical underwriting as a criteria for qualification, and premiums may vary based on the results of a medical exam.
However, term life insurance policies are set with an end date in mind, which means they are typically among the cheaper options for people interested in protecting themselves and their beneficiaries with specific goals in mind. These policies set the assurance that a beneficiary, or beneficiaries, will receive a predetermined, income-tax-free payout.
The main caveat with these types of insurance policies is that if the agreed-upon term passes without incident, the policy expires without any payout. While ideally everyone would outlive their term policies, in practice it means beneficiaries never see a benefit from the policy.
What other options are there?
Where term-based policies expire after a set period of time, whole life insurance allows purchasers to enter into an agreement with an insurance provider that'll cover them for the duration of their entire life. These policies, however, are significantly pricier options, and may also require a more comprehensive look into one's health.
Whole life insurance also comes with a cash value component, arguably providing the best living benefit to a life insurance policy. Cash value can be withdrawn directly or borrowed against as a secured loan. However, withdrawing or borrowing against cash value can reduce the death benefit of the policy.
Who should choose term life insurance?
Term life insurance offers an affordable way to protect loved ones against the financial damage that could come from an unexpected death. When it comes to replacing lost income during working years, term life insurance offers the best value in its protection.
On the other hand, for those who want to guarantee that there'll be a death benefit available to their loved ones whenever their life ends, a whole life policy may be a better choice.
Whatever the case may be, the right life insurance policy can offer essential security and peace of mind, which is truly invaluable.
Contact: carolina.darbellesv@iquanti.com
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Original Source: Prudential Financial: Is Term Life Insurance Worth It?
