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What type of life insurance is best for me?

What Type Of Life Insurance Is Best For MeThe type of life insurance that is best for you is one that provides adequate coverage for your loved ones, but also still at a reasonable price. Many life insurance experts advise that the determining factor in which type of insurance is best depends on how long you are planning to keep the life insurance policy.

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For instance, if you are young and healthy, it may be wise to purchase a less inclusive life insurance and use the additional money saved to invest another way. Take a look at the different options that you have for purchasing life insurance.

What is term life insurance?

The first type of life insurance is called term life insurance. This policy has a start and end date, and is commonly seen purchased for anywhere from a 10 to 30 year term. If the insured dies within a valid policy term, the beneficiary will receive the intended death benefits.

However, if the policy lapses or expires prior to the insured’s death, the beneficiary will not receive anything. If the policy lapses due to non-payment after the insured’s death, the beneficiary will still be paid death benefits.

This type of policy does not offer a cash value like permanent insurance does. There is also something referred to as decreasing term insurance which can be used to cover a specific type of decreasing debt such as a mortgage. Typically this type of policy will come with an option to renew at the end date; although, more often than not, the premiums will be higher. This is traditionally the type of policy a younger family may choose to invest in because it is typically the cheapest option.

What are permanent and whole life policies?

The second type of life insurance is often referred as permanent, cash value, universal, or most commonly, whole life policies. This type of insurance is designed to cover a person for their whole life. This type of life insurance policy has more rigid terms that must be adhered to such as specific policy payment dates, a cash value account which is essentially a return on investment which can be used to pay the premiums, as well as other specifications.

A universal life insurance policy gives more flexible terms to the premiums and cash value accounts. Premiums can be paid as billed and on time, more than billed, less than billed, or even no payment.

These types of policies are used to stabilize the premiums over the course of the policy, as with cash value policies that premiums will not fluctuate. Further, many companies allow the cash value account to be drawn from to pay for the premiums, although this will ultimately reduce the death benefit on the policy. If you cancel the policy in the early years of the term years, be prepared for an expensive decision.

These types of policies are truly meant to last for a whole life and are spread out evenly over the years to account for all costs. Canceling the policy because you can’t afford the premiums or because you find a policy that better fits your needs will cost a considerable amount.

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What is the purpose of your life insurance purchase?

Knowing the answer to this question is essential to deciding what type of life insurance if best for your needs. Is it simply to ensure your loved ones are cared for when you pass away, or do you also have some business/estate tax incentive? This will certainly make a difference in the type of policy you end up purchasing.

There are greater tax incentives to the cash value policies:

  • Your beneficiaries are typically not required to pay income tax on the payout from the death benefits.
  • Plus, if you name specific beneficiaries to the death benefit payout, this will not be included in your estate taxes.

When you do begin shopping and comparing prices and types of life insurance plans, here are a few things to keep in mind.

  • First, you need to make an assessment of your insurance needs.
  • Second, decide whether a term or permanent life insurance policy is best for your needs.
  • Third, research the companies to make sure the one you pick is financially stable and has good customer and business ratings. Companies that will provide the financial ratings are Standard & Poor’s, A.M. Best, and Moody’s.
  • Fourth, be sure to take the time and research to find the best price and coverage.

To find a life insurance policy for the best coverage and price for your family’s needs, use the free life insurance quotes tool and your zip code right now!

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