Why Life Insurance?
If your loved ones depend on your financial support for their livelihood, then life insurance is a must, because it replaces your income when you die. This is especially important for parents of young children or couples who’s partner will find it difficult if they no longer have the source of income provide by their partner. You will also need to provide enough money to cover the costs of hiring someone to cover the day to day household tasks, like cleaning, laundry, cooking, childcare and everything else a growing family needs.
No amount of money can ever replace a person. But more than anything, life insurance can help provide protection for the uncertainties in life. Without a doubt, having life insurance coverage will bring you and your family peace of mind. It’s one thing you can be sure of and no longer question if they’ll be taken care of when you’re gone. None of us know when we’ll pass away. It could be today, tomorrow, or 50 years into the future, but it will happen eventually. Life insurance protects your heirs from the unknown and helps them through an otherwise difficult time of loss.
Types of Life Insurance
As its title indicates, whole life insurance provides a lifetime death benefit for a set premium amount and builds cash value you can use while you’re living.
The strength of a whole life insurance policy is that it provides guaranteed cash values and benefits in return for fixed premiums. A trade-off to consider is that a whole life policy may build cash value at a lower rate than alternative coverage options.
Term life insurance is basic coverage that generally does not build life insurance policy cash value. Consumers typically buy term life insurance to provide death benefit protection for a specific period of time.
Premiums for term coverage are usually initially lower than other types of life insurance because the policy only provides a death benefit for a defined period. Later, some term insurance policies can be extended or converted into another type of coverage.
However, if you renew or convert your coverage, your new premium will probably be higher than your previous coverage, and can continue to increase as you grow older.
Guarantee Universal life (GUL) insurance policies provide a death benefit as well as the opportunity to build policy cash value. This coverage is different from term and whole life insurance because, within policy limits, you can vary the amount and timing of your premiums. Typically, you can also increase or decrease your death benefit (based on your insurability). As long as you maintain sufficient policy value to keep your policy in-force, your policy’s flexibility enables you to pay premiums as your circumstances allow.
Your cash value in a GUL policy is determined by the amount of premiums you pay, the declared interest crediting set by the insurance company, and policy charges.
As a policyowner, you have more flexibility with GUL than with whole life, but you assume additional risk. GUL policies usually have fewer guarantees than whole life coverage, so you must carefully manage premium payments and any distributions taken to help ensure your policy will stay in-force. This type of life insurance policy usually offers a built-in no lapse guarantee that can last for the lifetime of the insured life or for a shorter period selected by the policyowner.