A Life Insurance Policy is a contract between the insurance company and yourself that will financially protect your loved ones in the event of your death. The insurance company guarantees to pay a sum of money (the Death Benefit) to your beneficiaries tax-free.
There are two types of life insurance policies: Term Insurance and Permanent Insurance.
Term Insurance:
Coverage is provided for a fixed number of years (the Term) usually 10, 20 or 30 years.
This is an inexpensive plan that allows you to get significant coverage for all your insurance needs while paying an affordable premium.
Insurance planning is crucial since premiums remain constant for the duration of the term but increase dramatically if you wish to renew the policy for an additional term.
It is an excellent solution for individuals and young families who are looking for an affordable solution that will provide the funds needed to cover their outstanding debt or mortgage, and provide an income for their dependents in the event of their death.
Permanent Insurance (Whole Life and Universal Life):
Permanent insurance plans provide protection for as long as you live and the death benefits will always be paid out to your beneficiaries.
Permanent policies have a cash value that can be cashed out or accessed in various ways while you are alive, e.g. to provide income during retirement.
Premiums are paid for a number of years (usually 10 or 20) after which the policy is paid up for life. Alternatively, you can choose to pay a lower premium, for life.
Whole Life and Universal Life plans vary in cost, investment risk and guarantees.
Tax advantages associated with Permanent Life policies make them a powerful tool in estate planning and wealth transfer.
When is the right time to apply for Life Insurance? Now!
Since premiums are based on age, smoking status, overall health and lifestyle, it makes sense to apply sooner rather than later. Also, any changes in health might affect your ability to qualify for insurance in the future.