Life insurance is a policy in which an insurance company agrees to pay the policyholder’s beneficiaries a death benefit in case of the insured’s death. The death benefit is typically a lump sum payment, but some policies may have different terms for how the benefit is distributed. Life insurance policies are important to provide families with financial security, but despite this, approximately 38% of families lack life insurance coverage. Of the families who are covered, many lack the proper coverage amount to suit their life insurance needs.


Life insurance is often neglected by younger families as they tend to have other significant debts to attend to, but failing to have coverage puts dependents at significant risk. Final expenses can be daunting following a death, not to mention the accompanying loss of income. Younger families are also at an advantage when buying from life insurance companies since policies get more expensive as you age. Some types of policies even give you advantages like building wealth through the cash value of the policy.


Types of Life Insurance


While insurers offer many options for choosing a plan, these can generally be divided into two major categories: term life vs whole life.


Term Life Insurance: A term life policy lasts for an agreed-upon period in which your beneficiaries will receive a lump sum payout in the event of your death. Term policies are generally sold in increments of five years, but it’s possible to find policies that let you renew every year. Term insurance tends to offer lower premium payments, and it has the advantage of providing coverage only when you need it. A 20-year term policy is the most common, and they’re perfect for families worried about sending their children through college but don’t plan on keeping a policy once their children graduate.


Whole Life Insurance: Whole life plans, also called permanent life insurance, are policies that provide lifetime coverage. These policies provide a life insurance payout as well as a cash value that can be built over time, and they’re a good idea for those who suspect they’ll always have dependents or those looking for insurance products with investment options. Whole life policies offer the advantage of fixed premiums, though this is in exchange for starting with higher premiums compared to term life policies.


Whole Life Advantages


While whole life insurance isn’t popular everywhere in the world, these policies do offer some substantial advantages over their cheaper counterparts. With a traditional whole life policy, the death benefit increases each year the policyholder ages. Naturally, if the policyholder lives a long life, their policy will pay off much more than if they used term options. Even if the insured doesn’t have dependents, the payout will still cover final expenses, and they can even draw from their significant cash value while they’re living.


Universal coverage is a type of permanent life insurance that lets the insured contribute any money from their premiums that’s higher than the current cost of insurance to their cash value. This type of plan is most frequently sold in the U.S., and it allows policyholders to quickly grow their cash account. Variable universal life insurance takes things a step further by offering policyholders options for different cash accounts that are similar to mutual funds.


Starting a Policy


Getting a life insurance policy in your name is relatively straightforward. The only thing that might hold up some people is the fact that pre-existing medical conditions can affect eligibility for certain plans as well as premiums. The first step is to look for accurate quotes online or to speak to an insurance agent about your desired amount of coverage. You’ll provide some basic information about your medical history and submit an application form. Afterward, you’ll have a brief medical exam that will confirm your eligibility and rates.


Once you’ve submitted all required materials, an underwriter will begin finalizing your policy. Compare life insurance with iSelect to find the best rate for your desired plan.


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