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The cost of a policy and the features it offers can vary tremendously depending on the type of insurance you choose. Here's a rundown of term life insurance and permanent life insurance. There are also differences between insurance companies. For example, not all companies will charge the same price for the same type of policy. So it's good to shop around.
Term Life Insurance
Term life insurance covers you for a period of time you select and pays benefits only if you die during the time you're covered. Term life is often referred to as temporary insurance. These policies do not accumulate cash value, which means if you do not die within the time you're covered, your estate does not collect any money from the policy when it ends. However, most companies offer conversion privileges to permanent policies, which means you can turn your term life policy into a "permanent" one under some circumstances.
Term life insurance typically costs less than permanent insurance. Proceeds are not taxable to your beneficiaries. They supplement employer-sponsored life plans, or older policies that may be inadequate due to inflation. While in effect, you typically can convert to a permanent policy without evidence of insurability. You can buy a large amount of term insurance to complement your permanent policy.
Permanent Life Insurance
Permanent life insurance provides lifetime protection, and lets you build cash value over time. You can use your cash value to take out a loan for emergencies, fund a major purchase, or send children to college.
With permanent life insurance, your premiums remain constant over your lifetime. Death benefits will be paid when you die. Also, some insurance companies will advance death benefits to pay for nursing care or terminal illness expenses. These features are also available for some term life policies. You can accumulate cash value, tax deferred. Also, you can withdraw or borrow accumulated cash value.
With life insurance policies varying from company to company, comparison shopping is the best way to find the right amount of coverage for the best price.
How Much Life Insurance Coverage do You Need?
Your life insurance needs may vary depending on your particular stage in life. This means that an unmarried person who doesn't own a home may not need as much life insurance than someone who is married with children. As none of us want to leave financial trouble for our loved ones, you should ask yourself what you need to make sure your dependents can continue to live the lifestyle to which they are accustomed.
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