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Life Insurance Heart

Understand the Process

When you apply to get some life insurance, you'll have to decide on what type of policy you'd like. Here is a guide on the two primary types of life
insurance to assist your decision.

Permanent

This kind of life insurance never expires. That means that, as long as you pay your premiums, you will have lifetime protection. As with all types of coverage, this will pay a death benefit to your beneficiaries in the event of your death. With some permanent offerings, your premiums may even accrue cash value that is tax-deferred. If you get a plan with this option, you can access the cash value to provide retirement income, cover emergency expenses, or pay for education costs. Eventually, you may even be able to apply your cash value toward your premiums, which could mean you don't have to pay them anymore. If any of the statements below apply to you, you might consider a permanent option:

  • You want a buffer against inflation. Some permanent plans let you increase your death benefit to keep up with inflation.
  • You would like tax breaks. You can get a plan that accrues cash value on a tax-deferred basis.
  • You would like the option of accessing cash value. With permanent policies, you can withdraw the cash value of your plan or take out a loan on it.
  • You can make financial decisions. You can choose how your premiums are invested with some offerings.
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Term

Term life insurance is the other option you will have when you go to purchase. The less expensive of the two, this is a basic policy with a straightforward cash benefit. Your beneficiaries will receive this benefit if you die within the specified term, which ranges from 5-30 years. If you are still alive at the end of this term and do not renew, your agreement will expire and your beneficiaries will not receive a death benefit. With this type of plan, your premiums do not double as investments, which is why it tends to be cheaper than permanent ones. If any of the statements below apply to you, you might consider a temporary offering when you begin shopping:

  • You cannot afford a permanent plan. If you are not in a position financially to pay the higher premiums of this type of agreement, you might opt for term.
  • You have young kids. If you have young children, you can buy term protection that will cover you until they are financially independent.
  • You want home mortgage/loan protection. Term policies will let you select coverage to match your decreasing loan or mortgage amounts.
  • You need supplemental coverage. Term is a good way to supplement other coverage for times when you feel you need extra protection.

Check out the next page to see who needs life insurance.