Life insurance is perhaps one of the most unfortunate things to buy because when you consider it you are actually dealing with the topic of your death. Nonetheless, it is extremely important to have a life insurance policy because it will take care of your family after your death.
Especially if you are the only earning member of the family you need to have an insurance policy which can keep your family going even when you are not around. When it comes to life insurance, there are number of options available in the market. The chances are that you may be overwhelmed with the choices. Here is a quick look at some of the options so that you can make an informed choice.
The options of term insurance and whole insurance
There are several categories of life insurance. There is one category which deals with the term of the insurance policy. In this category there are two types of insurance policies. The first policy is named as Term Insurance and the other one is called Whole Insurance. There is a significant amount of difference in these two types of policies.
What is Term Insurance?
As the name suggests, term insurance, is the policy that covers your family members if you die within the period of contract. For instance, if you signed up for a term insurance policy which covers you for 25 years, your family will be paid out if you die within this period. If you die after 25 years your family will not get paid for it. Since there is limited number of years this is the reason why term insurance happens to be the most cost-effective insurance option.
What is whole insurance?
Whole insurance or whole life insurance is the opposite of term insurance. As you may have already guessed, it covers the insurance of the family for your entire life span. There is no fixed term and your family gets paid no matter how long you live. Since it covers the entire life this is the reason why whole life insurance is pretty expensive with much higher premiums. The biggest benefit of this policy is that there is 100 percent guarantee that your family will get paid no matter when you die.
Lump Sum plan or monthly payout plan
Life insurance can also be categorized in terms of the payout method. If you are opting for the lump sum amount then your family gets the insurance money one-time as a lump sum amount. Let’s say you insured your life for $100,000. After your death your family will get the whole amount all at once.
However, if you opted for the monthly payment, then your immediate beneficiary will get a fixed monthly amount for the rest of their lives. If you make the insurance policy index-linked then the monthly payout will get adjusted according to the inflation.
Life insurance is the guarantee that your family gets paid in the event of your death. It is a wise decision to opt for a life insurance policy to ensure your family’s financial security.