By Karla Sullivan
One of the first resolutions for the new year to consider is purchasing a life insurance policy and one of the common questions is should I buy term or a whole life policy? Whole policies are advantageous when bought young and can be used as a savings plan. Premiums are higher but they stay the same throughout the life of the policy.
Term, is generally a excellent short-term solution as Tony Steuer comments and which one that is better truly depends on your personal situation. Term is inexpensive compared to whole and as the name suggests, it gives you what you need for a specific time. However, if you are past 80, your chances for a term policy accepted will be very difficult.
According to the Insurance Information Institute, a 20 year term, if you have young children,can contribute to funding their college education or even pay off debt. There are also convertible term policies that allow you to convert to permanent insurance without a medical exam but you will pay a higher rate.
You can purchase a term that features an annually increasing premium and level death benefit or one where the premium stays the same for a specific number of years. Some policies will let you renew. Return of premium term allows you to receive the sum of premiums returned sometimes with interest.
A less expensive term policy can free up some savings to invest elsewhere. Before taking this step, consumers should consider the financial needs of their dependents or any expenses they may leave behind. Insurance experts recommend that individuals purchase a policy equal to five to seven years of income, with more coverage if additional expenses are anticipated.
It is essential that you choose a policy that meets your individual or family needs but that you can afford as well. Life Foundation recommends a term when people are in their family-formation years and on a tight budget. They also suggest thinking about needs that will disappear in time such as paying for college. The bad and good of term when it ends is that you may be able to renew but face higher costs since age is one of the key factors.
As 2014 quickly approaches, make it your resolution to at least look into life insurance if you don’t have it. Buying life insurance can be confusing so document your lifestyle concerns and talk to a qualified insurance professional to be prepared for life’s unexpected.
