Life Insurance basics
Term Vs. Permanent Life Insurance First, you need to understand the two basic types of life insurance: term and permanent.
Term life insurance provides a predetermined death benefit and covers you for a predetermined number of years, usually five to 30. The annual premiums are fixed and are based on your health and life expectancy at the time you apply for the policy.
Permanent life insurance combines a death benefit with a savings or investment account. The policy covers you for as long as you're alive, even if you live to be 100. The premiums can be fixed or not, depending on the policy your purchase. Like term life insurance, the premiums are based on your health and medical history.
Permanent life insurance isn't the best choice for most people. It's several times as expensive as term life insurance for the same amount of coverage. While your policy does accumulate some cash value through its savings or investment component, which a term policy doesn't have, you pay a hefty premium for this feature and for having a policy that will definitely pay out one day. A term policy will hopefully expire before you do.
An oft-touted benefit of the permanent policy's cash account is that you can borrow against it. But, with the money, you could save by purchasing term insurance instead, you could amass your own nest egg so that you don't need to borrow anything to pay for a large expense. Also, when you borrow against your permanent life insurance policy, you diminish the policy's value and can defeat the purpose of even having life insurance.
Give Dennis Ravi a call at Coastal Insurance Agency for your own personal review.
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