While the medical industry has come a long way in ensuring that people live longer, there are no guarantees. Therefore, buying life insurance is essential, especially if you have friends and family you want to protect in the event of an accident or illness.
Like all big decisions, selecting the right life insurance plan takes some careful consideration. Not all plans are alike, and this makes choosing the right plan for you tricky. If you are considering life insurance, but find yourself unsure about which policy to select, Northwood Mortgage™ can help. Here are a few things you should know about life insurance and how it works.
Choosing Between Term or Whole Life Insurance
There are two main forms of life insurance to invest in, which are term and whole. These work as follows:
Term insurance, as the name implies, covers only a selected number of years. It doesn’t accumulate a specific cash value to borrow against but sets aside coverage only for the years it is active.
Whole life insurance builds a cash value that can be withdrawn or paid out upon the passing of the insured. The protection continues and accumulates as long as premiums continue to be paid and are valid for the lifetime of the insured.
So, which is best for your needs? This depends on whether you’re purchasing life insurance for a reason, such as:
- Young children to support
- Financial responsibilities
- Debt and mortgage to maintain
- Family who would otherwise be unable to afford funeral costs
If you are beginning a dangerous job for a set number of years, perhaps term insurance is the right choice for you. If you are protecting your children against the potential absence of a parent, then whole life insurance would be a better option. It’s also worth noting that term insurance has lower premiums, while whole insurance is pricier.
Life Insurance Without Financially Dependent Beneficiaries
There’s an assumption with life insurance that all beneficiaries must be friends or family who are financially dependant on you. Not all insured parties leave their estate to relatives. Some choose to leave money and property to charitable organizations, an educational institution, or any other donation they wish to be made.
Not Every Provider is Equal
Life insurance isn’t a “one size fits all” type of product. In fact, many life insurance policies are tailor-made to fit the insured. Just as your policy is unique, each provider requires different checks and credentials to ensure you are a good candidate for their firm.
If you apply for life insurance and are denied through one office, don’t be afraid to try elsewhere. Every practice is different. Comparison shopping allows you to see the pros and cons of each company, their rates, hidden fees associated with each policy, as well as the total coverage you’ll receive. Be sure to check on things such as:
- Types of death not covered by the policy (military, suicide, airplane crash, etc.)
- Additional riders that can be added to your policy
- Initial premiums required
- Renewal policy procedures
- Cancellation restrictions