If you want to think about the importance of a life insurance policy, you must think about your family after you die.
Ask questions like who will pay the home or education loan you’ve taken? How will your family manage your funeral expenses? And most importantly, how will they survive the day-to-day expenses and fulfill their basic needs?
A life insurance policy can be an answer to all your questions as it acts as a safety net for your family when you pass away.
Understanding A Life Insurance Policy
A life insurance policy is a contract between you and your insurance company. Life insurance companies such as Globe life offer different types of policies. The company provides a financial death benefit to your family if you have paid your premiums.
Term Life Insurance
Term life insurance covers you for a definite period, i.e.,10,15, 20, or 30 years. This policy has no benefits and pays when you die during your policy term. After the term ends, the policy expires. Some of its types are simplified issue life insurance and return of premium life insurance.
Permanent Life Insurance
Permanent insurance has no specific time frame and pays your family death benefits whenever you die. But it includes a cash component, which grows over time on a tax-deferred basis, which means you don’t need to pay tax on the cash benefits. Whole life, universal life, and variable universal life are examples of permanent life insurance.
A Guide to Choose the Right Life Insurance Policy for Adults
Like most people, you must be confused about selecting a policy and deciding on the coverage you need. Before you decide on any insurance policy, make sure you give a thought to the following factors.
The Importance of Life Insurance in Your Financial Goals
Term life insurance can be a sensible choice for you if you want coverage for your children until they are financially independent or have some loans going on. This way, you can protect your family from any financial stress after your sudden death. With this policy, you can also plan to save for your retirement later once you’re free from monetary obligations.
But if you‘re looking for a policy that covers you throughout life and gives cash benefits, too, a permanent life insurance policy is the right choice for you. The cash benefit in permanent life insurance can be a part of your long-term financial strategies.
You can borrow money against your cash benefit or earn annual dividends on it. Moreover, you can use the money to pay your premiums and even surrender it at the time of retirement for some cash in hand.
The Premium Amount You Can Afford
Term life insurance is the most affordable of all life insurance policies and has a significantly higher coverage with a lower premium rate. So, term insurance is best for you if you want good coverage but have a limited budget. Most term policies have level premiums, which means you pay the same amount every year/month.
The premium, however, can vary on the length of the policy and the coverage amount. A permanent life insurance policy will cost you much more compared to term life insurance. The premiums of permanent life insurance are high as some part of your premium is placed in your cash benefit account, which accrues over time.
If you can pay more and want some savings, you can choose it. But, whatever policy you choose, make sure it commensurate with your financial goals.
Your Health And Age
If you are young and healthy, a medically underwritten policy can be the best choice for you. This policy is affordable and offers robust coverage starting from $100,000.Younger and healthier individuals with a good health history are considered low-risk for the insurers; therefore, the premiums are low.
Another thing you should know is women pay lower premiums than men. But if you are in your 50’s or have a specific condition, you can go for permanent policies like guaranteed issue, final expense, and accidental death insurance.
Riders
Some companies can offer life insurance riders. It enables you to customize the policies to accommodate your needs better. Several riders can apply to your life insurance policy. However, the availability of each rider depends on your insurance company.
Life insurance riders can include:
- Benefit for accidental death: It offers additional insurance coverage in case of accidental death.
- Premium rider waiver: It exempts the policyholder from making any premium payments if they become disabled and can no longer work.
- Disability income rider: This insurance rider pays an income every month when the policyholder suffers severe injury or illness.
- Benefit rider for accelerated death: When the policyholder is diagnosed with a terminal illness, this rider allows them to receive the entire or a portion of their death benefit.
- Rider for long-term care: This life insurance rider is similar to the Benefit rider for accelerated death. The policyholder can use it to pay for assisted living, in-house care, or nursing home expenses. Additionally, expenses that go into daily activities such as eating and bathing can also be claimed.
- Rider for guaranteed insurability: It allows policyholders to buy additional insurance whenever the need arises. It does not require any medical review for approval.
These riders can give additional benefits to you and your family. You can add these riders to your insurance, but they will increase your insurance premium. However, the extra premium is generally low. It also requires little underwriting. Some insurance companies include a few riders in your base premium.
Additionally, it is essential to go through the policies before adding a rider to your insurance plan. You may seek the assistance of a financial advisor to evaluate their benefits according to your needs.
The right insurance policy depends upon your financial conditions and dependents. Both the term and permanent have their pros and cons. Your choice should be based upon the coverage you need, your budget, and the reason you want a life insurance policy.
Do your research and make a choice only when you have found a policy that fits your needs. A detailed company review will help you know more about life insurance policies. You can find more information on sites like https://insuranceforfinalexpense.com/globe-life-and-accident-insurance-company-review/.
