Purchasing life insurance is an important decision that can have long-lasting ramifications for buyers, but some customers find themselves wishing they had a life insurance for dummies explanation before them.
The world of life insurance can be be quite complicated and difficult to understand. Fortunately, life insurance does not have to feel like an unexplained puzzle. In fact, the basics of these insurance policies are actually quite simple to understand. Read also: Protect Loved Ones with Family Insurance.
Term Vs. Whole: Two Forms of Insurance to Consider
There are two basic forms of life insurance, term coverage and whole life insurance. The key difference between the two is that term coverage only covers the life of the policyholder, whereas whole life insurance combines the coverage with investments. In addition to these two policy forms, there are sub-policies of whole coverage, including universal and variable policies.
When looking at the two different forms of insurance, it is normal to question which is the right fit. Rather than becoming perplexed by the whole ordeal, it is advisable to simply break down the benefits of each policy. Use the following guidelines to help determine which is the right policy for you:
- Term coverage is much less expensive than whole life insurance. Whole life insurance will carry more benefits, whereas term coverage only covers one’s life.
- Many term coverage policies decrease in value as the policyholder ages.
- Whole life coverage protects the policyholder over the course of his life, whereas term coverage expires when the policy term ends. Read also: Quality Life Insurance Coverage For Parents.
While there are many other factors that insurance buyers will want to keep in mind, these keys can help narrow down the field. It is always advisable to speak with an insurance agent when looking at different policies. These professionals will be able to give a fuller look at the subject, and provide a dummies life insurance breakdown if needed.
Distribution, Taxes, and Other Considerations
Beyond the simple decision of which form of insurance is the right match, there are many other considerations that life insurance buyers need to carefully review when signing an insurance policy. One example is how funds will be distributed, should the policyholder pass away. Many insurance companies offer both lump sum and installment options, but it may be necessary to solidify decisions when signing the policy.
Taxes are another key consideration that are often overlooked. Tax laws vary greatly from state to state, although life insurance has historically been exempt from government taxing. As governments across the nation struggle to meet budget deficits, this could potentially change, however. For example, Hawaii considered retroactively taxing life insurance policies just last year. Read also: What To Know About Life Insurance Beneficiaries.
Although life insurance is an intricate subject that has many different parts, obtaining an insurance policy does not have to feel like mission impossible. You may feel like you need life insurance for dummies, but an insurance adviser should be able to answer any questions you may have. By investing a bit of time and energy reviewing all of your options, you may discover finding insurance is easier than you had expected.