How to Choose the Right Type of Life Insurance
What you will learn:
Life insurance provides protection for your family upon your death.
Term life and permanent life insurance policies provide different advantages.
As most adults start a family, they start to think about how to make sure the ones they love are always secure. One way to do that is with life insurance. While desirable and necessary, it can also be confusing. The blog is designed to give you the insight to make your choice easier.
What is the Purpose of Life Insurance?
In short, the purpose of life insurance is to protect your family. A life insurance policy prevents your beneficiaries from suffering from financial hardship in the event of your untimely death. The amount of protection each individual needs can vary, depending upon the age and number of dependents, the other available financial resources, and standard of living. Other considerations should include outstanding debt, expenses like a funeral or medical expenses not covered by health insurance, daily living expenses for the dependents, personal wishes like providing money for education, etc.
How to Choose Life Insurance
There are different types of policies depending on individual needs.
Buying Indexed Universal Life Insurance in West Michigan
Universal life insurance is a policy that allows the owner to allocate cash value amounts to either a fixed account or an equity index account. Indexed universal life insurance policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit. Here a few ways to determine if an IUL insurance policy is right for you:
- IUL insurance policies are low priced, meaning the policyholder bears the risk, so the premiums are low.
- There is less risk since the policy is not directly invested in the stock market.
- IUL insurance policies also have no limitations on annual contributions. And, the cash value in IUL insurance policies can be assessed at any time without penalty, regardless of a person’s age.
Buying Term Life Insurance in West Michigan
Term life insurance is a policy that guarantees a specific death benefit upon the death of the policyholder within a specified term. There are a few ways to determine whether term life might be the right choice for you:
- You want to make sure your family’s needs are covered during a certain time period, such as until your children graduate from college or your mortgage is paid off. You should match the term of your policy to the event, such as a 20-year policy to get your young children through college or a 30-year policy for a mortgage.
- Since the premiums are generally lower, term life is ideal for those on a limited budget. The younger the insured, the lower the premiums.
- A convertible term policy may be a good choice if you think there could be a change in financial needs at some point. These policies allow you to convert to permanent insurance without a medical exam for a higher premium.
Buying Permanent Life Insurance in West Michigan
Unlike term life, permanent life insurance does not expire after a set term. It also has both a death benefit and a savings component. There are two main types of permanent life insurance policies: whole life and universal life. Ways to determine if you should invest in a permanent life insurance policy include:
- You want your policy to have a savings component that is tax-deferred.
- You want your policy to be able to secure a loan or pay for the policy premiums if your circumstances change and you can no longer afford them.
- You want to be able to borrow money against your policy when your credit rating would prevent you from borrowing money elsewhere. Keep in mind that if you borrow against your death benefit and die before you can repay the loan, the outstanding balance will be deducted from the benefits your beneficiaries receive.
- You want coverage to continue throughout your life.
Speak to a Financial Advisor in West Michigan
Jacobs Financial Services serves families right here in West Michigan and surrounding areas for all their financial investment needs. To learn more about how to secure your family’s future, please make an appointment to talk to one of our financial advisors today.
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