Life insurance can live with you throughout your entire lifetime. And thus, it’s essential to tick all the boxes in understanding your insurance policy and its implications for the future. On that note, here are some key things to note when choosing a life insurance plan.
Type of Life Insurance
One of the first considerations to make in choosing a life insurance plan is understanding the type. Most life insurance policies usually fall within two categories: permanent life insurance and term life insurance. So, what are the differences between the two, and why choose one over the other?
Term life insurance has a defined period. They usually last over a decade or more until they expire. There are about three options for beneficiaries who prefer term life insurance over permanent. They include decreasing term, convertible term, and renewable term life insurance.
The differences between these three options hinge on the extent of coverage and means of renewal. With the decreasing term, life insurance coverage decreases at a predetermined rate as the beneficiary ages. Convertible term life insurance allows for policyholders to switch from term life insurance to permanent life insurance status. With renewable insurance, policyholders can renew their package annually at a quote determined in the first year.
Generally, term life insurance packages don’t build cash value over time. Once the period ends, insurance coverage ceases, and beneficiaries risk not receiving any form of reimbursements. So term life works best for beneficiaries seeking to incur limited expenses while ensuring financial stability in the long term.
Permanent life insurance policies are more expensive than term life insurance options. Beyond death benefit settlements, permanent life insurance coverage can also serve as a form of investment, depending on the options they choose. Some of the options of permanent life insurance include …
- Universal life insurance
- Whole life insurance
- Guaranteed issue insurance
- Cash Value Insurance
Premiums
A premium payment is a commitment usually required by life insurers before underwriting a policy. Some insurance policies have low premiums, and others have high premiums. Before signing off on your insurance plan, you’d do well to understand what form of insurance premiums your policy favors. A life insurance company can charge premiums on their financial products in one of two ways. These include the stepped or level premiums.
Level premiums are more expensive compared to stepped insurance premiums. However, stepped insurance premiums can increase the amount you pay as you age. Even though level premiums can increase with inflation, they’re an excellent option to take when looking for utter peace of mind with your insurance plan.
Living Benefits
There have been several insurance innovations over the years. Even the COVID-19 pandemic has altered insurance shopping a great deal. This is especially true for life insurance companies who have had consistent issues about insurance products being literal payments for your death.
Living benefits afford life insurance policy owners some flexibility to get the most out of their package while living. You can look out for companies with such policies if you want to get some settlement off your policy. Not all companies have adopted such new methods, and more importantly, living benefit packages may differ from one insurer to another.
Automatic Payments for Life Insurance
Life insurance policies come with their own restrictions. If you don’t settle insurance payments on time, you risk losing your package and walking away with no reimbursement at all. Life insurance policies aren’t a great option to settle manually. Usually, your insurer will set it up as a right-from-source automatic charge on your credit card. That way, you don’t have to bother about paying your bills after you overspend your salary for a particular month.