There are a lot of different options when it comes to life insurance and not all types of insurance are right for every individual. The professional insurance agents of Ackerman Insurance Services will work closely with you to determine just what types, and what amounts or coverage levels, are appropriate for your needs.
The Purpose of Life Insurance
While it may seem strange, some people are not at all sure why they need life insurance. This is a very unique type of insurance in that, in all but a very few specific types of policies, it only pays out on the insured’s death.
The individual holding the policy chooses an amount of coverage and that, along with their age and health, will determine how much they pay per month in a premium. As long as the individual is current with their payment and is not violating the terms of the policy it will pay off upon their death to their designated beneficiaries.
There are three basic types of life insurance, whole life, universal life, and term life. There are pros and cons to each option and discuss your family’s financial needs, and your short and long term financial goals can help you decide which option is right for you.
Term life insurance is taken out for a specific period, typically 10 or more years.
Term rates typically are set on a schedule to self-adjust and tend to increase the longer you have the policy. However, the monthly rates are often very low, especially for younger insured individuals, making it a good option. There is no cash value build up in the policy and it only pays if the premiums are current at the time of death.
The name says it all with whole life policies. You are buying a policy that has a higher monthly premium than term insurance, but part of the premiums that you pay are used as investments by the insurance company. Typically these monthly payments are fixed and do not change throughout the insurance coverage.
There is a cash value that is associated with these policies after a specifically designated time. This increases the payout of the policy if there is a death or it also allows you to borrow against the value, just as you would be able to with other investment options.
Another variable similar to whole life is called universal life insurance. This allows more flexibility than whole life with the ability to change your premium payments as your life circumstances change without changing the death benefit of the policy. Like whole life, it can be designed to build cash value in the policy and may be a better option for many people than the more rigid whole life.