Your biggest asset is not your house or your investment portfolio, it is your ability to continue to earn an income. Protecting this asset is fundamental to any financial plan and family protection. In order to take care of your loved ones, you need to ensure they could continue without financial hardship. Your situation will dictate which insurance is right for you- as life insurance is not a "one size fits all."
There are three basic types of insurance: Term Insurance, Whole Life Insurance, and Universal Life Insurance. Each type of insurance has purpose, advantages and disadvantages.
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Term insurance is designed to provide coverage for a specific period of time, and then the coverage ceases. This insurance is useful for young families who have a lot of debt with expenses like a mortgage, credit cards, childcare expenses and vehicles. They need a lot of coverage now to offset the high debt load and the ongoing cost of raising a family. This insurance is also the most affordable for people in this situation. Once the debt load is paid, the life insurance policy should be re-evaluated to allow you to change to a different type of insurance, if required.
As the name indicates, Whole Life Insurance provides coverage for the entirety of a person's life. Since this type of coverage is designed to pay out no matter when the person dies, the premium for this type of insurance is usually high compared to Term Life Insurance. Still, if you consider a person's adult life span of 60+ years and plan to have life insurance for the entire time, Whole Life Insurance would actually be the cheapest option.
Whole Life Insurance provides for a level premium and a cash value table included in the policy guaranteed by the company. The primary advantages of Whole Life Insurance are guaranteed death benefits, guaranteed cash values, fixed and known annual (monthly) premiums, and mortality and expense charges will not reduce the cash value shown in the policy. There are also tax advantages for those who need to shelter money.
Universal Life Insurance is intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for greater growth of cash values when compared to Whole Life Insurance. The client has a greater say in the type of investment and how it will be distributed.
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