When it comes to protecting your business or loved ones, life insurance is one of the most important decisions you can make. Life Insurance can pay off your mortgage, debt, replace income and pay for your children’s education. It can also pay estate taxes and provide liquidity to fund a business transfer or loss of a key employee. There are many companies that offer a never ending amount of life insurance products. We’ve explained how they work and what to look for below.
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Term Life Insurance
You can buy term insurance in almost every variation you can think of. It can be best compared to auto insurance. You buy it for a set amount of time, and if you don’t use it, you lose the premiums you paid to the insurance company. You can buy term life insurance that renews every year with a small increase in premium or you can lock the premium in for a set period of time, these typically range for 5, 10, 15, 20, 25, or 30 years. Often times, term life insurance is the cheapest form of coverage you can get and is great for protecting families and sometimes businesses.
Universal Life Insurance
Is a permanent form of life insurance. If funded correctly, it can last your entire life. Typically Universal Life Insurance comes with insurance charges that increase every year as you get older. They are designed so you pay more in premiums in the early years to build cash value over time so the policy can cover the higher costs while you age. When interest rates are high, these policies can be appealing but they need to be monitored over time. If the policy isn’t funded correctly the policy owner can end up with incredibly large insurance premiums late in life to keep the policy in force. Universal Life Insurance has a couple unique variations that are sometimes sold.
Whole Life Insurance
When used correctly can be a great addition to any saving, investment or estate plan. Whole Life Insurance has guaranteed cash value, guaranteed death benefit and guaranteed premiums. Most Whole Life policies also pay dividends which can be accumulated in the cash value and used to purchase additional life insurance. The dividends can also be returned to the policy owner or used to pay down premiums. The dividends generated are based on the performance of the insurance company. Checking the dividend history and doing a little research on the company is always advised. There are insurance companies that have a great reputation and incredible financial ratings. Whole Life Insurance is a long term commitment, make sure the premiums you elect are affordable.
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