Different Types Of Life Insurance: How To Pick The Right Coverage
Wouldn't it be nice to rest easy at night knowing that your loved ones will always be protected if something unexpectedly happened to you? This peace of mind can be found through many means, but one of your best options is life insurance.
As grim of a topic as this may be, life insurance protects the well being of those who could suffer a financial hardship caused by your death. It can be used to meet your family’s future needs by replacing your income or more specific needs such as making sure the mortgage is paid off, leaving your family with a debt-free home. Farm Bureau Insurance is one of the largest writers of individual life insurance in Tennessee, offering competitive rates for term, whole and universal life coverage. Now is the time to learn more about these coverages and how you can protect the ones you love.
How Does Life Insurance Work?
The main purpose of getting life insurance is to guarantee the well-being of your loved ones after you pass, right? Right. Under the terms of a policy, this is called a death benefit. A death benefit will be the amount of money that your insurer will pay to your chosen beneficiaries (your loved ones), if you pass away before your policy expires.
Named beneficiaries are required to notify the insurer of your death in order to file a claim and receive the death benefit payout. To ensure that your loved ones will be taken care of, it’s important to keep your policy up-to-date with your desired beneficiaries. These beneficiaries, or recipients, can consist of any person or organization such as children, partners or close loved ones.
That being said, every policyholder will be required to pay a premium in exchange for the coverage included with their life insurance plan. This is a regular payment that can be made on a monthly, quarterly, semi-annual, or annual basis, depending on the terms of the policy. The premium amount is determined by various factors, including the insured person's age, health condition, lifestyle, occupation, and the amount of coverage desired.
Types of Life Insurance
Term Life Insurance
Term life insurance is a temporary insurance that you purchase for a set length of time—aka. a "term." Ranging from one to 10, 20 and 30 years, term life is a way to get the most coverage for the lowest cost. It has a low initial premium which stays level for a specified period of time.
Term insurance is most often used to take care of temporary needs like replacing your lost income if you find yourself unemployed or paying off a mortgage. It is a great option for anyone who is looking for something affordable and more flexible when it comes to setting policy terms.
However, there are drawbacks—the main one being that after the specified term, the cost will increase. This premium increase is typically determined by the insured person’s age at the given time. Additionally, this type of insurance does not build cash over time, meaning you won’t receive any sort of returns on your paid premiums and no investment or savings options. After a specified term has expired, your loved ones will not receive a death benefit, meaning you’ll need a replacement policy if you want to continue coverage.
Whole Life Insurance
Whole life insurance, also known as permanent insurance, is meant to last your entire lifetime (as long as you keep paying the premium, of course) and increases in cash value over the years. The amount of the premium will always remain the same, and policies guarantee a set death benefit. The policies’ cash value accounts can grow each year and are tax deferred. The cash value (the amount you’re able to withdraw or borrow) can even be borrowed to help with emergencies or when times get tough. Just remember, the accumulation of cash value takes time, and surrendering or canceling the policy early may result in the loss of the cash value accrued.
It's important to note that whole life insurance premiums are typically higher compared to term life insurance due to the lifelong coverage and cash value component. However, it is a great option if you’re seeking a consistent premium payment while guaranteeing financial stability for your loved ones.
Another valuable feature of whole life insurance is the opportunity to receive policy dividends.* Dividends can be used to increase your death benefit, increase your cash value, or even help reduce your premium.
*Not all whole life policies pay dividends and dividends are not guaranteed.
Universal Life Insurance
Universal life insurance is a flexible form of permanent coverage that can last your lifetime and can also increase in cash value over time. Flexibility means that you can change different aspects of the policy—the size of the premiums, whether the death benefit increases with time or stays level—which allows you to change your coverage as your needs change.
Another important feature of universal life is that it has the ability to increase in cash value, depending on how it is funded. The cash value account earns interest and the taxes are deferred (paid at a later date). With so many products and coverage options, universal life insurance can easily be included in a budget of any size.
Find Life Insurance That Works For You
To learn more about your life insurance options, get in touch with your friendly, local Farm Bureau Insurance agent or call 1-877-876-2222. You can also get a quote by visiting Farm Bureau Insurance of Tennessee online.
