Life insurance is important for several reasons. Firstly, it can help to preserve your financial state to your loved ones. It could help cover immediate expenses like funeral costs, outstanding debts, and ongoing living expenses.
Secondly, life insurance could serve as an essential estate planning tool. It could help with estate planning and provide a source of inheritance for your heirs. The death benefit from a life insurance policy can pass to beneficiaries outside of the probate process, providing a smooth transfer of assets.
Life insurance is a vital financial tool that comes in various forms, each suited to different needs and circumstances. Having the right life insurance policy in place is a responsible and caring decision that supports your financial position for you and your loved ones.
Term Life Insurance
Term life insurance provides coverage for a specific term, typically ranging from 10 to 30 years. If the policyholder passes away during the term, the beneficiaries receive a death benefit. However, if the policyholder outlives the term, there is no payout. Term life insurance can be helpful for those in a specific period when financial obligations are high, such as mortgage payments or children’s education expenses.1
Whole Life Insurance
Whole life insurance, also known as permanent life insurance, provides lifelong coverage. It not only offers a death benefit but also includes a cash value component that grows over time. Policyholders can access this cash value through loans or withdrawals. Premiums for whole life insurance are typically higher than term life insurance, but the policy remains in force as long as premiums are paid.1
Universal Life Insurance
Universal life insurance is another form of permanent life insurance that offers flexibility in premium payments and death benefits. Policyholders can adjust their premiums and death benefits to meet changing financial needs. Universal life insurance policies also include a cash value component that earns interest based on current market rates.2
Cash Value Life Insurance
Cash value life insurance is a form of permanent life insurance—lasting for the lifetime of the holder—that features a cash value savings component. The policyholder can use the cash value for many purposes, including borrowing or withdrawing cash from it, or using it to pay policy premiums.3
Sources-
https://www.investopedia.com/term-life-vs-whole-life-5075430, September 2023.- https://www.investopedia.com/articles/pf/07/whole_universal.asp, May 2023.
- https://www.investopedia.com/terms/c/cash-value-life-insurance.asp, May 2023.
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