Life insurance can be an important part of your family’s long-term financial planning. However, shopping for the right coverage can be intimidating.
All life insurance policies have one thing in common – they’re designed to pay money to the “named beneficiaries” when you die. The beneficiaries can be one or more individuals or even an organization.
In most cases, policies are purchased by the person whose life is insured, but life insurance policies can be taken out by spouses or anyone who is able to prove they have an insurable interest in the person.
There are many different types of life insurance policies. However, they fall into two classes of life insurance products: term and cash value. Take the time to explore your options and potential needs with a trusted advisor before you make a commitment.
Term Life Insurance
Term life insurance – is a policy that is purchased for a period of time (a term). The policy pays money to the named beneficiaries if the insured dies during the term. Term life insurance is intended to provide lower-cost coverage for a specific period.
Term life policies may include a provision that allows coverage to continue (renew) at the end of the term, even if your health status has changed. However, those premiums may be higher than the original policy. Ask what the premiums will be before you renew. Also, ask if you lose the right to renew at a certain age. If the policy is non-renewable you will need to apply for coverage at the end of the term.
Cash Value Life Insurance
A cash value life insurance policy is different because you can keep it for as long as you need it. These policies also have savings or investment features, which make it possible for policy owners to get money from the policy while they’re still alive. Whole life, universal life and variable life are types of cash value policies.