Find out if a term or whole life insurance policy is suitable for you and your situation.
The idea of life insurance is very confusing for a lot of people. When should you purchase life insurance? What carrier should you buy the plan through? How much life insurance do you need? The questions go on and on. If you have a family and people who depend on you, you need life insurance — plain and simple. There are various types of life insurance, but the most common are whole and term life insurance policies. Most young families should opt for purchasing term life insurance, but why? Continue reading to find out.
Why Should Young Families Purchase Term Life Insurance?
Defining Term Life Insurance
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Before purchasing term life insurance, it’s essential to understand what it is and why you need to have it. Term life insurance is a type of life insurance that guarantees a payout if the person who purchased it dies during the specified term. You purchase a certain amount of money that a beneficiary will receive if you pass away. Once the term expires, the coverage is over, and no one gets the money. You can decide to purchase a new policy or convert it into permanent coverage. You can also choose to terminate your policy altogether and have no life insurance after your initial policy expires.
Your policy premium is based on the policy’s value and other factors that include age, gender, health, occupation, smoking status, and more. There will be a medical exam required that you must pass to receive your policy in some cases. Term life insurance is very straightforward and gives a person the coverage they need, so it is usually the best choice for young families. To compare, let’s define whole life insurance.
Defining Whole Life Insurance
As mentioned above, whole life insurance is a lot more complicated than term life insurance policies. Once you purchase a whole life insurance policy, you will be covered for your entire life. Unlike term policies, there is also a savings component of whole life plans. You will accumulate a cash build-up over the time of your policy. This cash value can be invested, or the policyholder can take the money out while still alive. So, why wouldn’t you choose a whole life policy over a term life policy with this added cash value?
Why Choose Term Life Insurance
Whole life insurance does have the bonus of saving extra cash, but that isn’t always the right choice for every family. Other factors go into searching for and finding the most suitable plan for your needs. Take a look at these three reasons why term life insurance is an excellent option for young families.
Cheaper: Without the added investment piece, that means that the term life insurance policies will cost less — a lot less. It offers protection for a predetermined amount of time. The life insurance policy hopes you outlive the policy, so they do not have to pay your beneficiary that payout. As a young family, investing in life insurance does not always make the most sense.
Simpler: Term life insurance is much easier to understand than whole life insurance, making it simpler to shop around than whole life insurance. All you have to think about is your coverage amount, length of the term, and the carrier you choose. Ensure you speak with an independent insurance agent to find out the plans and carriers that are most suitable to your needs.
Flexible: You get to choose how long you want to be covered, making it much more flexible than whole life insurance. After your plan expires, you can decide how you want to move forward. Whether that’s purchasing another plan, changing over to a permanent plan, or not purchasing any life insurance. The needs for life insurance are constantly changing, especially for a young family, so the coverage you need now might be different in 15 years.
Purchasing term life insurance is a giant step for a young family. You and your significant other are coming together to choose to protect your children and loved ones in the event of a tragic accident. It’s crucial to ensure that you make the correct choice when applying for a life insurance plan. Fabric is a place for you to quote life insurance policies, write wills, and organize your family’s financial needs all in one place. Check out Fabric to start managing your financial needs to get back to what matters most — your family.