Purchasing life insurance is confusing. The fact of the matter is, some terminology requires a degree in English just to decipher it. When you are preparing to purchase life insurance, speak with an insurance agent that can explain these terms to you in ways you can understand them. There are benefits and drawbacks to both; however, term life insurance is a better option.
Only One Reason to Purchase Whole Life Insurance
To be quite honest, there is only one real reason to purchase whole life insurance. The main purpose of whole life insurance is to protect your family against estate taxes upon your passing. The other purpose is to make the agent and insuring company a lot of money.
The way that these insurance companies make so much money is by charging far more than they really should. The extra funds received from whole life insurance policy holders is used to make investments. This is how these companies pay the premiums to families of the deceased.
More Options Available
With term life insurance, you do pay a decent premium per year but with that, you have more options as far as coverage and how long you wish to purchase coverage for. Insurance companies do make estimates as far as your mortality rate in combination with your age and health conditions.
Term life insurance is less expensive. With this you also see a higher return and the ability to purchase a 10 – 30 year term. Premiums can be paid yearly or monthly for this type of insurance. You also have the option of purchasing annual term life insurance, which is more cost effective in the long run.
Deciding on the Right Policy Type
The decision here is simple, do you need to protect your family from estate taxes and fees or are you purchasing enough term life coverage to take care of everything? Once you make that decision, you just have to shop around for the best rates for the amount of coverage you wish to purchase.
As with any type of insurance, there are going to be restrictions and stipulations in place when it comes time to actually cash in on the policy. Make sure that there are no disclosures that will prevent your family from obtaining these funds upon your passing. Life insurance is meant to be in place to cover final expenses including funeral services, so that the burden is not on your family financially.