Life Insurance Coverage
The subject of life insurance coverage can be a confusing one. A lot of time, discussing various types of policies and how to buy life insurance can even be tricky. Most people have a lot of questions when it comes to life insurance.
How much do I need? What policy is best for me? How much will it cost? Will my loved ones have enough to be taken care of? Which is the cheapest to buy? One of the most popular questions is what is the difference between cash-value and term life insurance?
Cash Value Life Insurance Policy Coverage
Cash value life insurance, or universal and whole life insurance; combines a death benefit and a tax deferred saving element. Occasionally referred to as permanent life insurance, these types of policies are intended to cover you for your lifetime. Many people like these types of insurance policies because they can also provide funds for retirement.
Annual premiums for cash value policies are generally higher because part of each payment pays for insurance and the remainder of cash is invested. The Cash value is what you can borrow from the policy or receive by surrendering it. Many people choose to do this because the funds offered by the policy are ideal for retirement planning and college funding, among other goals.
They also accumulate tax deferred until you withdraw them and at the time of withdrawal, they may be only partially taxable. Keep in mind that loans and withdrawals will reduce the policies cash value and death benefit. How much you contribute to the investment side of the policy may also affect your taxes, so make sure to tell your tax professional if you decide to buy this type of insurance.
Life Insurance Made Easy
Term life insurance is the most fundamental and popular type of life insurance, especially for online buyers. You purchase coverage for a designated period of time, from one to many years and the policy provides a death benefit if you die during that specified period. The policy can be renewed until age 65, or even older in some cases.
Term life insurance is popular among younger people because it provides the maximum amount of coverage for the lowest cost. Early premiums are low and increase as you become older. For example, a $250,000 death benefit will cost less in your 30s than it will in your 50s.
For this reason, term life insurance is usually a better value for young healthy people. It is also one of the easiest to understand. There are no tax implications, it is cheaper and provides adequate coverage for families and loved ones should the policy ever be needed.