There are two basic types of life insurance:
- Term life insurance: Term life policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1-30 years and may, in some cases, be renewed until you reach the age of 95. With guaranteed level term insurance (a popular type) both the premium and the amount of coverage remain level for a specific period of time.
- Permanent (cash value) life insurance: Permanent life policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash value account. During the early ages of the policy, the cash value contribution is a large portion of the premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow – tax deferred – as long as the policy is in force. If needed, you can borrow against the cash value, minus any loans and surrender charges.
There are various types of Cash Value Life Insurance including Whole Life, Universal Life, Variable Life and Variable Universal Life, all of which have different payment and coverage plans.
What to Consider
Before deciding whether to buy term or permanent life insurance, consider policy cost and potential savings that may be available. Also keep in mind that your insurance needs will likely change as your family, job, health and financial picture changes. It’s easy to understand why people tend to put off purchasing life insurance, whether it’s time, the subject of death being boring and morbid, or not knowing where to begin.
Buying life insurance is really an important task that should be addressed. Life insurance can help ensure that your family will have enough money to meet their financial obligations in the event of your death.
We are here to assist you in answering questions so you can make the right decision for your circumstances. Contact one of our CFS* Wealth Management professionals today at 303.443.4672 ext. 2240
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