Confused about life insurance? Well, that actually makes perfect sense, as the term “life insurance” can apply to several different types of policies. Figuring out the differences between these life insurance coverages can be tricky for anyone, but figuring out which makes the most sense for your budget and lifestyle can take some extra savvy. That’s why we’ve broken down some of the most common forms of life insurance for you so that you can make this essential step in protecting your finances and your loved ones much less of a hassle.
Burial or Final Expense Insurance
If you are a senior who is looking for life insurance or are not interested in full life insurance coverage, then opting for burial insurance may be your best bet. Also known as final expense insurance, this sort of policy is designed to provide surviving family members with the financial means to help pay for funeral expenses and other end-of-life costs. Burial insurance can also help offset any outstanding medical bills or debts, which can provide some additional financial protection for your loved ones. Seniors should consider adding burial insurance to their current coverages, but it doesn’t hurt for younger folks to look into this extra financial cushion as well. Rates are generally reasonable, so think about including burial insurance in your plans.
Term Life Insurance
For new parents or young adults with financial responsibilities, buying term life insurance may provide the coverage and financial peace of mind needed. With a term life insurance policy, you set the time frame during which you need coverage the most. For instance, if you have a new baby, you may want to think about how long you will need to provide financial support so that you can set your term life insurance policy accordingly. Most parents support their children through college but you may want to choose a term that provides more of a cushion. Although term life insurance can be very affordable, once your selected term is up, coverage stops. So, if your spouse depends on your income as well, this may not be the best insurance policy for you.
Whole Life Insurance
Selecting a term life insurance policy can be a savvy financial move for those want financial protection for loved ones for a limited period of time. You will likely end up paying far less in premiums for a 10-, 20-, or 30-year policy, but if you want financial peace of mind for your loved ones without limits, and with more options, you may need whole life insurance. Although the premiums for these policies can be fairly steep, part of those premiums will be invested, which helps you build equity over time. With this additional equity, your family will have more resources available if you pass away, but you’ll have cash value that you can use while you are still alive. This cash value can come in handy during retirement or for unexpected expenses.
Universal Life Insurance
Universal life insurance is similar to whole life in that they are permanent life insurance options. With permanent life insurance, you retain coverage as long as your premiums are paid, unlike term life insurance, where your coverage runs out at the end of the designated time period. The big difference between these two permanent forms of life insurance, however, is that those with universal life insurance have the flexibility to alter the death benefit or monthly premiums over time. Since universal life insurance is also partially investment-based, there are some inherent risks to opting for this sort of coverage, and premiums can be more expensive as well.
Understanding the various types of life insurance is no simple task, but hopefully, the information above will make it easier and help you get the coverage you need. Because no matter what sort of policy you decide on, having some sort of life insurance coverage is a smart financial move for everyone. Life insurance can give grieving families some financial peace of mind and relieve stress during an already dark time. So, add this layer of protection for your loved ones so that they may have one less financial worry.
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