As you leave the more carefree days of college and head into your twenties you find your world changing in many ways. The fun times of university days are replaced by climbing the career ladder and working a full-time job some 50 weeks out of the year. If you meet the perfect love partner, you are likely to move in together and a lot of couples get married around this time. Buying a home and starting a family seems to come next on the list along with getting a life insurance policy.
In the early days of adulthood, you typically only have to think about how you are doing. When you have a family and children and own a house, though, there's a lot more to consider. Everyone hopes for the best but sometimes the deeper realities of our lives intrude. It's important to know that you are taking care of your spouse and family, especially if something were to happen to you. Buying the right life insurance policy is one way you can show your loved ones that you truly treasure their wellbeing.
Term Life Coverage
As you start to evaluate different options, you'll find a whole new lexicon you have to learn. Term life insurance is one of the most easily understood types of policies. Basically, you purchase coverage for a specific number of years and pay premiums to keep it in force. If something unfortunate happens and you pass away before it expires, then your beneficiary is paid a pre-set amount of money by the company. The money, also known as the death benefit, can be paid out as a lump sum, in monthly payments or in the form of an annuity. These policies are typically more affordable than other types of coverage.
Whole Life Coverage
When you purchase a whole life policy, you are investing in a permanent form of insurance that does not expire. It basically consists of two components, a death benefit and an accumulated cash value. It's helpful to think of the cash value as a sort of savings account that is tax-deferred and earns interest at a preset fixed rate. Because this form of coverage includes a cash value that accumulates over time, it is possible to cash out your policy in the future. If you are considering this option, you'll be able to research what the cash surrender value of your policy is by carefully reviewing your coverage documents or contacting your insurer. You can also get the information you need by filling out an online form at the website of a company that specializes in this process.
Universal And Variable Life Coverage
A universal life insurance policy is similar to whole life offerings. When you pay your monthly premium part of it goes toward the death benefit and part of it is applied to the cash value. Within that structure, however, you are allowed to change the death benefit amounts and premium without having to issue a new policy. It's critical to note that the interest rate is variable and market-based instead of fixed. With variable options the structure is similar to whole life in that there is both a death benefit and cash value. On the investment side, however, it's more like a specialized IRA. Basically, the cash created by policy premiums can be invested into a select set of mutual fund options specified by the insurer. This allows you to earn even more money but also can put your funds at risk in the event of a market downturn.
