Life insurance is necessary for just about everyone who works and has dependents. It offers financial protection for the families of breadwinners in case the breadwinner loses his life. Can you imagine a stay at home mother and two or more kids trying to make ends meet in the unfortunate event of the husband/father’s death? It would be quite a struggle. Instead, they could be provided for with a life insurance policy. This peace of mind is priceless. Below we offer a few tips on the different types of life insurance policies and what they offer.
Term Life Insurance
Term life insurance provides money to the policy holder’s benefactors for a set period of time after his death. This length of time is typically 10 to 20 years. Term life insurance premiums are usually consistent from month to month throughout the entirety of the coverage. When the coverage period comes to an end, it can be continued onwards but this will typically require a higher monthly premium. Term life insurance is usually significantly cheaper than permanent life insurance, which is described below.
Permanent Life Insurance
Permanent life insurance is different from term life insurance in the fact that it pays money out to the decedent’s benefactors for the entirety of their lives. According to professional insurance brokers in Calgary at Thomson Schindle Green Insurance & Financial Services Ltd, like term life insurance, permanent life insurance benefits are exempt from taxes. If you want to put a time restraint on the pay out, you’d want to go with term life insurance, but if you’re sure that you want the beneficiaries to get a payout for the rest of their lives, permanent is the way to go.
Whole Life Insurance and Universal Life Insurance
Permanent life insurance is further divided into whole life insurance and universal life insurance. The main difference between the two is that universal life insurance lets the policy holder change coverage and premium amounts and costs over the course of his policy. Whole life insurance has stiff premiums and coverages that are nearly “set in stone”.
Higher Premiums Can Be Worth It
The typical head of a household makes a million dollars or more during his lifetime. Yet the typical life insurance policy is around a third of that ($300,000). In the event that he passes away, how are his dependents supposed to make up the difference of $700,000? They likely won’t be able to. A $2 million life insurance policy for a 35 year old man will typically cost $100 or less in monthly premiums. It is clear that the benefits are worth the costs.
A breadwinner’s income should be insured just like his house, his automobile and other valuables. A life insurance policy is a necessity but the quality of the policy is what really matters. It is important to pay a little more in life insurance monthly premiums in order to have a more meaningful payout. This way, the benefactors can keep up their standard of living for at least a few decades after the decedent’s death.