While insurance is not an investment, it is an important part of smart and sensible personal financial management. Insurance is protection. Protect everything you have worked so hard to win. Protects your spouse in the event of premature death. Send the kids to college. Keeps a family together at a time when money shouldn't be a concern.
You need insurance, but buying the right coverage to protect your family and assets is like learning a new language. Term, Whole Life, Universal Life, Actual Cash Value, Dividends, Policy Loans - It is a maze of insurance products, and finding the right coverage for your needs may require a little research.
Here's an introductory course on how to get the most out of life insurance and still have the protection you and your family need.
Types of life insurance
There are two basic types of life insurance with numerous variations on one theme.
Term life insurance is the easiest to understand. It is also the cheapest protection you can buy.
Term life insurance is paid when the insured (you) passes within a defined period, a defined period during which your life insurance coverage is in force. Shelf life comes with a variety of terms - terms of five, ten, or even thirty years are available. https://www.blakeinsurancegroup.com/insurance-companies-in-tucson-az/
The younger you are, the lower your monthly premium cost - the dollar amount you pay for protection each month. Premiums are calculated based on two factors: your age (and general health) and the amount of dollar protection you need. It's simple. A $ 100,000 term life insurance policy won't cost as much as a $ 500,000 policy because you're buying less protection.
With term life, you keep things simple. The insurance company pays X dollars to the beneficiaries when the insured dies, as long as the policy is in force, that is, death occurs during the term of the policy, for what is called term life insurance.
Term life policies don't add value, you can't borrow against them, and if you choose a short term and your health changes, you could end up paying more for your term life insurance than you would pay if you bought long-term insurance . policy: one that covers it in the long term.
To determine how long you need to live, add up the funeral costs, outstanding personal debt, mortgage debt, ability to pay tuition, and other significant expenses that would exhaust family resources. Calculate what it would cost your family for a single year.
Then multiply by a factor between 5 and 10. Use the lowest factor if you don't have a lot of debt and the highest factor if you have a couple of mortgages and have three children to pay in school. That is the length of life you need to protect your family and all of your expectations.
The other kind of insurance is whole life insurance, also called permanent insurance, universal insurance, variable universal insurance, and other product names, but they all fall under the general class of coverage called full life insurance.
The first difference between the term and the whole life is that the whole life covers it from the day you buy the policy until you die. Of course, this assumes that you pay your full life insurance premium each month. There is no term (duration of current coverage) for a lifetime. Buy it when you are young and your premiums will be low and you will start to accumulate cash value.
That's the other main difference between full and term life insurance coverage. All life pays dividends. Not much, but dividends that can be used to lower monthly premiums, or can be allowed to accrue accrued interest.
The first difference between the term and the whole life is that the whole life covers it from the day you buy the policy until you die.