Life insurance is a contract between you and an insurance company that stipulates a payment to your beneficiaries, usually your spouse, children, or other family members, after your death. With this payment, you can keep your family members afloat if they are financially dependent on you. It is an excellent option, but where to start
Types of life insurance
- Term Life insurance – In this policy, the coverage offered is for a determined period. Policies range from 10, 15, 20, or even 30 years. At the end of the contract period, you will be able to extend your policy in one-year terms. However, each renewal will come with a higher rate. In the event of your death within the contract period, your beneficiaries will receive the agreed-upon payout. It is the most common type of life insurance and also the cheapest. Consider acquiring this type of life insurance in periods when you estimate that at the end of it, you will have no financial dependents, no debts, and have money saved in your bank account.
- Permanent life insurance – As the name implies, this policy will cover you for the rest of your life. It also has the advantage of cash value, meaning that a portion of your money will generate interest, and you will be able to profit from it. You may withdraw bits of cash, as long as you repay it so as not to reduce your death benefit. You can also fully withdraw all of the cash value and surrender the policy. This type of insurance offers loans within the cash value, which you can take out for any unforeseen expense or need that you will have to repay with interest. Lastly, you will be able to pay the monthly premiums once the cash value reaches a certain level that allows you to pay them.
Your need for life insurance will change with your life stages. To determine an amount, you should consider the expenses you want to cover, which could be tuition, mortgages, or even income replacements. Many term policies have the option to convert to life terms. First, determine your insurance needs to find the best option for you!