Choosing life insurance is an important decision to make for your family. It’s a contract that involves paying regular premiums to an insurance company. In exchange, your beneficiaries receive a lump? sum death benefit after you pass away.
Two types of life insurance you can apply for are term life insurance and whole life insurance. Both have their benefits, so when it comes to term vs. whole life insurance, the best option will depend on your specific circumstances. Here’s what you should know to decide which life insurance is right for you.
Term life insurance
Term life insurance guarantees payment of a death benefit if the policyholder dies before the specified end date. The length of the coverage can vary but is often between 5 and 30 years. The premium you pay for your insurance will depend on the value of the policy, your age, your gender, and your health. Insurance companies might also look into other things, such as your occupation and family history.
Term life insurance is usually not taxable. Your beneficiaries can use the death benefit to pay off your health care and funeral costs. But keep in mind that if your death occurs after your policy has expired and you haven’t renewed it, your loved ones won’t receive a payout.
The main advantage of term life insurance is it typically comes at a lower cost than whole life insurance. It’s also a more flexible option because you can choose a term length that works for your current circumstances. As an example, choosing a 5?year term can be useful for those with short? term debts. A 20?to?30?year term might be more suitable for those who want a policy to cover larger expenses, such as a mortgage.
Whole life insurance
Whole life insurance guarantees payment of a death benefit for the insured person’s lifetime. The coverage is valid as long as the premiums are paid on time. With whole life insurance, a part of your premium payments accumulates in a cash value account that grows over time. In many cases, the cash value will earn a fixed rate of interest.
You can take out the cash through a policy withdrawal or a loan, but it’s important to keep in mind that it will be taxable. If the loan isn’t paid back before your death, the amount will be deducted from the death benefit.
The insurer determines how much you’ll pay in premiums based on your health history, age, and occupation. It remains at a fixed rate, and the cost will not increase as you get older or as market conditions change.
How to decide which option is right for you
Consider your financial and life circumstances when deciding on the right life insurance for you. If affordability is important and you want coverage for short-term debt, term life insurance might be your best option. But if you’re financially able to pay higher premiums and want to ensure your family receives a death benefit, whole life insurance could be a better option. Most importantly, be sure to discuss the issue with your family before making any decisions.
Choosing the right life insurance is a good way to plan for the future and give your family peace of mind.
Coverage is underwritten by Aflac. Coverage may not be available in all states, including but not limited to NJ, NM, and NY. Benefits/premium rates may vary based on plan selected.
Optional riders may be available at an additional cost. Plans and riders may also contain a waiting period. Refer to the exact plans and riders for benefit details, definitions, limitations and exclusions. For availability and costs, please contact your local Aflac agent/producer. In Arkansas, Idaho, Oklahoma and Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400 and Riders: ICC1368050, ICC1368051, ICC1368052, ICC1368053, ICC1368054, ICC1368055.
Content within this article is for informational purposes only and does not constitute legal, financial or medical advice regarding any specific situation. Aflac cannot anticipate all the facts that a particular employer will have to consider in their benefits decision? making process. WWHQ | 1932 Wynnton Road | Columbus, GA 31999 Z2200580 Exp. 6/23