You’ve finally decided to buy life insurance. You know that you want a little extra money available to help take care of your burial expenses, help your family adjust to the loss of your income, or take care of your children’s education expenses. You may also have other considerations, such as leaving money for your heirs, maintaining a business, or giving to charity. However, even if you know what you want to do with the money, it can still be hard to know what to buy, or how much you should pay.
Figuring out how much life insurance you need is known in the insurance business as an estimate. For a start, have a seat and ponder over how much insurance you would buy if you didn’t have to worry about the pricetag on it. Now take that idealized insurance idea and look into the market to see how much it would actually cost you. Don’t try to acquire a policy you can’t afford to maintain for the long haul. It’s better to have a slightly cheaper insurance policy that’s there when you intended it to be, than it is to have more expensive life insurance that you have to drop before you pass.
When making a decision about how much insurance you need, start by figuring out how much life insurance you would want to get if cost were not a factor. Think about such factors as funeral costs, what your spouse and children need, and outstanding debts. After coming up with an amount based on those considerations, review price quotes, then balance the amount according to your budget realities. Life insurance is usually one of the first things to get cut in times of personal economic hardship. It is so important to choose a life insurance policy you can really afford, because you need it to be there for your family in case something happens to you.
If you get whole life insurance, though, you’ll have insurance that works the opposite way. This policy will remain in effect for your entire lifespan so long as you make your payments properly. Since this insurance is more reliable for the customer than term insurance, it costs a bit more.
Whole life insurance covers one’s entire life, as long as the policy is held. To keep the policy, premiums must be paid or the policy must be paid up. Whole life insurance can often be paid up over time, usually around ten to twenty years. Because everyone will certainly die and whole life insurance requires the insurance company to pay regardless of when you die, this type of life insurance policy costs more than term life insurance. The benefit of this added cost is that the policy never expires.
I recommend that families who have a lot of expenses balance their life insurance by purchasing larger amounts of term life insurance, and a smaller amount of whole life insurance that they can pay up. By doing so, they will still have some whole life insurance after the term life insurance expires.
Universal life insurance is like whole life insurance in that it does not expire as long as the policyholder keeps the policy. It differs from regular whole life insurance in that it places the life insurance and the cash value in separate accounts, whereas regular whole life insurance keeps them together. Largely due to tax considerations, this type of life insurance is attractive to many people as a way to unite life insurance and savings. You can withdraw or borrow against the policy once it accrues enough cash value. You may even see an increase in the face value of the policy. This explanation of universal life insurance is very barebones, since a full explanation of it would require another article.
Susan Reynolds is the webmaster for a leading South African Life Insurance website. For more information visit: http://life.insurance123.co.za/
