Most people recognize they need life insurance, especially if they have a family that depends on their income. However, a person may hesitate to purchase this insurance because they don’t understand the available options. When someone puts insurance decisions off, they typically end up paying more over the life of the policy.
Purchasing life insurance doesn’t need to be complicated. The following guide provided by the TD Bank life insurance review makes it easy to choose the right policy for your situation.
Term Life Insurance
Term life insurance policies provide protection for a specific time period. These policies often cover a person for 10, 20, or 30 years, and the purchaser determines the amount of the policy and the length of the term based on their financial situation. For example, experts say a person with a young child should purchase a 20-year term life insurance plan to ensure this child has funds to get through school and college if something happens to the parent. On the other hand, an individual might buy a 30-year policy when they take out a mortgage so their loved ones can pay off the family home if the insured passes away before the mortgage is paid in full.
Term life insurance benefits anyone who needs a large amount of life insurance but has limited funds for the purchase. As the policy typically only pays out when the insured dies, the cost of this policy remains much lower than permanent life insurance. If the insured party outlives the policy term, the coverage ends or they must renew it. This type of policy doesn’t build equity, so the person does not build a cash value.
Permanent Life Insurance
Individuals should consider permanent life insurance if they want to know they are covered until their death. This type of policy pays out whether the insured lives a week after the purchase or 80 years. Individuals appreciate knowing they are building savings when they choose this type of plan and the tax is deferred. They can borrow against the policy in the future for any purpose.
In fact, a person finds they can borrow against the policy to pay the premiums if they fall on hard times. Their credit score isn’t considered when a policy holder requests a loan, as the death benefit serves as collateral. If the insured dies before the loan is repaid, the insurance company deducts the remaining balance from the death benefit before providing the heirs with the balance.
Expect to pay a higher premium for a permanent life insurance policy when compared to a term life policy. Nevertheless, once a person locks in a premium, it doesn’t change throughout the life of the policy as long as the premiums are paid as agreed.
People find they have several choices when it comes to permanent life insurance. They may choose from variable life, universal life, whole or ordinary life, and variable/universal life. Learn more about each option before deciding which is right for your needs.
Convertible Life Insurance Policies
A third option exists in the form of convertible term policies. When a person with a term life insurance policy finds their financial needs have changed, they may convert this policy to a permanent one. They won’t be required to get a medical exam when doing so, but they will pay higher premiums.
Individuals should buy life insurance at a young age because that is when premiums are low. Premiums increase when a person must renew the policy. Furthermore, the insurer may require a medical exam if a person wants to qualify for low rates. Keep this in mind when purchasing a policy to ensure you get one that is right for your needs.