Life insurance is designed to provide for the financial needs of those who are financially dependent on you in case of your death. Beyond deciding what the financial needs of your family would be in your absence, the next big decision is whether to buy cash value insurance or term insurance.
Term insurance is life insurance that covers they need for a specific period of time, or term. The insured pays a monthly premium to the insurance company for a certain level of coverage and if the insured dies then the insurance company pays the beneficiaries the amount of coverage. The big selling point of term insurance is that relative to cash value insurance is cheap. While it does not carry an investment component like cash value those, since it is cheaper and a person can invest the difference of savings into their own investment accounts.
Cash value insurance costs a good bit more than term but does build a cash value over time. At a certain point in the future the insured could even withdrawal from the cash value of their insurance policy.
Which type of life insurance should you purchase?
One, if you don’t have a lot of money, term insurance may be your only choice. You may simply not be able to afford whole life premiums.
Two, the length of life insurance coverage is another factor in helping you to decide what kind of insurance to buy. If for some reason there is a long-term need then cash value insurance can be the better choice. However, only if it is a truly long-term need since it takes quite a few years for a cash value policy to build in value and to become a better financial move than buying term insurance.
Three, since buying term insurance means that you would invest your savings into your own investment accounts that means you must have the discipline to follow through and actually invest the money.
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