Understanding Life Insurance by Pamela S Thibodeaux (c) 2015
Now that we’ve determined it’s imperative you maintain life insurance coverage to protect your family’s future, let’s talk about the types of life insurance and benefits of each.
There are two main types of life insurance: Whole Life and Term Life.
Whole Life is exactly what it means; you get a policy that you pay premiums on for life. Benefits of WL is that the premiums never change, nor does the face amount. Many forms of whole (or Universal) life insurance offer benefits of cash value (like a savings), paid up benefits (should you get to a position that you are unable to pay premiums, you can stop and take a “paid up” policy for a lesser face value) cash surrender (give up the policy for whatever amount of cash has built up in it) cash loan or partial surrender (where you borrow from the cash that has built up in the policy over the years and pay back over time. With a partial surrender there is no payback, however the “surrender” amount or any unpaid loan amounts will be deducted from future claims).
Advantage: You can usually have a spouse or child “term” rider on a whole life policy, which gives coverage on other family members at a very low cost. It also enables you to cover otherwise uninsurable people due to illness and/or disease. In the instance of a spouse or child term rider another advantage is that those persons covered under the rider often have the ability to convert to their own whole life policy at a later time at the standard going rate regardless of health or occupation. In other words, you ensure their right to be insured.
Term Life, on the other hand, is also exactly what it says: You get a policy for X amount of $ at a certain rate for X number of years. (ie; $10,000 policy for $10 a month for 20yrs). Term life is great for those years you have high bills such as a mortgage. Many employers offer term life insurance through the company which is okay, but if you purchase this, make sure you can take it with you if/when you leave that employer. If not, purchase your own or an additional policy outside of work.
Many financial planners will advise you to take a certain amount of whole life insurance and combine it with term policies to cover items such as mortgages or simply for extra coverage during those years when your family is in its growth stage. Once you reach a certain point in your life (when the kids are grown and out of college, mortgage is paid off, etc) then you can allow the term insurance to terminate while keeping the whole life policy for burial expenses.
Parents and grandparents, one of the BEST things you can do for your children and/or grandchildren is to purchase a whole life policy when they are born. This enables them to keep the rates purchased as infants for the rest of their life.
Award-winning author, Pamela S. Thibodeaux is the Co-Founder and a lifetime member of Bayou Writers Group in Lake Charles, Louisiana. She has over twenty years experience in bookkeeping, insurance and tax preparation. Multi-published in romantic fiction as well as creative non-fiction, her writing has been tagged as, “Inspirational with an Edge!” ™ and reviewed as “steamier and grittier than the typical Christian novel without decreasing the message.”
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