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No one likes to think about death. However, sometimes it is necessary, especially when you have a family. Who does not want to make sure that if the worst happens, their family’s future is going to be secure? This is where life insurance can help.

What Is Life Insurance?

Life insurance is an agreement with an insurance company. In exchange for premium payments, they will provide your beneficiaries with a lump-sum payment — a “death benefit” — when you pass away. All death benefits are entirely income tax-free. 

Your life insurance policy will depend on your unique set of circumstances. There are three main types:

Term Life Insurance 

Term life insurance provides protection for a specific period. With this policy, you will pay the exact same premium payment for the entire duration of the coverage period. However, once the policy ends, you may only continue to get the benefits at a higher premium rate. As a general rule of thumb: term life insurance is the cheapest one on the market.

Universal Life Insurance 

Universal life insurance provides coverage for your entire lifetime. However, the terms are flexible, allowing you to increase or decrease your premiums and coverage when needed. Universal life insurance is typically more expensive than other options. There are several varieties of universal life insurance and most of them build cash value while also earning a minimum interest rate. 

Whole Life Insurance 

Whole life insurance also provides lifetime coverage, but the terms and payments are usually fixed. Whole life insurance focuses on cash value, with a savings component that accumulates tax-deferred over time. This means you will not pay taxes as the cash value increases over time. It is widely considered to be the simplest permanent life insurance, compared to universal life insurance. 

Which Policy Is The Best?

On paper, term life insurance is the cheapest. However, as always, lower price means less features. Term life insurance is short-term and has no accumulated cash value. Once the policy expires, there will be no coverage. If you want to only cover a specific time period, for example, while your children are still small or while you are paying off your mortgage, term life insurance is ideal. You can use the money you save on your premiums to invest in other assets, such as making bigger payments on your mortgage. 

Meanwhile, whole life insurance, though costlier, allows you to accumulate a large lump-sum over time without paying any taxes. Plus, the coverage is permanent and lasts your lifetime. Whole life insurance might be more appealing than term life insurance in a range of circumstances. For instance, it can help cover inheritance or estate taxes, which can be extremely costly for large estates. Additionally, it can set off funeral costs. If you have a lifelong dependent, e.g., a child with learning difficulties, you will want to ensure they will always be provided for. Therefore, whole life insurance is the best option. 

Finally, you might decide to opt for universal life insurance. 

Discuss with your family, financial advisors, and insurance brokers to decide on the best option for you. 

How to Save Money on Life Insurance

Whatever package you decide to go with, you want to make sure you are paying the right amount. To save money on life insurance, consider this:

  • Shop around Before committing to one life insurance policy, look around the market. There are dozens of different companies with different rates. Get the most cost-effective policy on the market.
  • Buy young As some policies set fixed rates, the younger and healthier you are when you get a policy, the less you will need to pay in the long run. Insurance companies rate your health and assign you a health class. The better your health, the lower your premiums.
  • Pay in full Paying your yearly sum in full, rather than in monthly installments, can substantially decrease the cost of your overall bill.
  • Undergo a medical exam – Showing the insurance company your medical exam results, especially when you have good health, can lower the cost of your premiums. 
  • Get reclassified – If your health has improved since the last time you were assessed, ask your health insurance provider to reassess your health to lower your premiums. 
  • Renewal guarantees – A renewable guarantee allows you to begin a new term after it ends, without undergoing a new health exam, but with increased premiums on account of your age. However, if you don't have a renewal guarantee, then you can be forced to find an entirely new policy. This can often lead to much higher premiums.

Before committing to a policy, evaluate your options and go over the details with an insurance specialist. Our experts are just an email away.

 

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