Experts generally advise individuals to purchase four types of insurance: life, health, long-term disability and auto. Each of these can offer unique coverage against risk while offering specific advantages.
An understanding of coverage, costs and networks can help you select an insurance plan suitable for you and your family’s needs, health status and budget when making this decision. When reviewing policies make sure they fit with these factors.
Term Life Insurance
Term life insurance provides protection for a set period, such as 10, 20 or 30 years, with death benefits being distributed upon your passing during that term. Term policies are affordable, straightforward and can cover many financial needs – making them a smart option for people with obligations like mortgage payments, debt payments and final expenses.
Term policies can be tailored to suit the length, premium payment schedule and coverage amounts you need for your situation. NerdWallet’s free online calculator can assist in selecting an amount suitable to you based on NerdWallet’s calculator results. Unlike permanent life insurance policies which usually require medical exams to qualify, term policies tend not to require one either but tend to carry higher premiums as a result of not needing medical exams to qualify.
As part of a group policy at work or through your union, term life insurance may also be purchased with lower coverage limits and easier understanding. Furthermore, group policies allow cancellation without penalty should your needs change over time – an ideal solution for people looking for cost-effective temporary protection aligned with income-earning needs without needing permanent policies that require investments for permanent policies.
Permanent Life Insurance
Permanent life insurance lasts throughout your entire lifetime, unlike term policies which typically last just a few years. As well as providing a death benefit and savings element that builds with time if premiums are paid regularly. Accessing cash value via loans or withdrawing it directly may help cover expenses more easily. There are four main forms of permanent life insurance: whole life, universal, variable universal and index universal policies each offering differing premium rates, death benefit increases over time and savings amount increases, and whether or not medical exams are necessary before being purchased.
Permanent policies tend to be more expensive than term policies because they cover your entire lifetime and include savings elements – meaning the insurance company will have to shell out more money than if you simply took out a term policy for a specified number of years.
Permanent policies tend to have more restrictions and guidelines than term policies, with some even permitting you to draw down from death benefits while you’re still alive if needed for long-term expenses like nursing home stays – though surrender charges could eat into any savings built up over the years.
Survivorship Life Insurance
Survivorship life insurance, also known as second-to-die or joint life insurance, pays out death benefits upon both policyowners passing. This differs from a first-to-die policy which will only pay out upon one passing and may only pay off debts left behind; survivorship life policies typically remain active throughout your lifetime if premium payments continue as promised.
Survivorship life insurance policies can be an excellent tool for estate planning purposes and should be considered when married couples or business partners want to leave an inheritance to each other’s heirs, children or charitable organizations they both care about after death. Furthermore, survivorship policies help avoid inheritance taxes.
Survivorship life insurance policies tend to be less expensive than two individual permanent policies because insurers face less of an increased risk when both people are covered under one policy. They’re an ideal solution if one of you has difficulty accessing life insurance due to health reasons, ensuring coverage for both of you. Survivorship policies also make an ideal legacy gift or support trust funds for special needs children.