When you buy a car, you get car insurance because you want to protect your investment. The same thing happens when you buy a home. So why don’t you buy insurance to protect your family?
About 60 percent of Americans have these types of insurance policies. The purpose of these insurance policies is simple: provide for your family when you’re gone. However, there are various types of insurance policies and each one may have benefits for your household.
Can You Even Get an Insurance Policy?
Many people worry about how much insurance policies will cost based on their age and health. The truth is insurance companies work with a variety of individuals who are older and have medical issues to create the perfect policy.
Anyone can get these insurance policies, but in some cases, you will pay more if you have a terminal illness. However, every policy is specific to the user, so it doesn’t hurt to talk to an agent about your options if you want to protect your family.
One thing to keep in mind is that policies can be good investments, especially if you are young and in good health. As you pay into a policy, you can withdraw or sell your policy at any time. It can build incredible value, which we explore in the “cash value policies” section below.
Which Insurance Policy is Right for You
While there are a lot of choices when it comes to insurance, the best policies usually match your budget and account for everyone in your household. When you pass, it’s important that you have a policy in place that can provide for funeral arrangements, college funds, replacement income, and other financial support.
However, not all policies offer large settlements. Some are created just for temporary protection, which you can use to invest in a nest egg when you retire. Other policies help you save for a long-term goal, and then there are those life insurance policies built especially for your financial situation in case of death.
We explore all of the options below.
First, How Much Insurance Do You Need?
It’s one of the most commonly asked questions when it comes to term life and whole policies, as well as cash value policies. We recommend that you use an insurance policy calculator to get the exact amount, but experts state that you should get a policy that covers 10 to 12 times the amount of your annual salary. If you make $50,000 a year, then you’ll want to get a policy for at least $500,000.
Whole Life Insurance
If you want a long-term policy, then whole life insurance is the best way to go. With these policies, you lock in the premium or payout amount for as long as you hold the policy. Every month, you pay your premiums to the company. A portion of that premium also goes towards the cash value and grows the long-term period of the policy.
As long as you hold the policy, it builds cash value. These policies work more like a savings account, allowing you to grow your money. If you pass on, your insurance company pays out the benefits to your beneficiaries. These policies are built around your budget, but you generally want to pitch in more per month, in the beginning, to grow your insurance policy’s cash value quickly.
Term Life Insurance
When it comes to insurance policies, term life insurance is probably the simplest and most affordable of all. This is because these policies are written to financially support only the people you choose, and it specifies a fixed amount. However, term life policies are not worth anything if you die outside the court of the term written in the contract.
With this type of policy, you pay the insurance company to take on the risk of your death during the time period specified in your policy. Most term life policies last between 10 and 30 years. For example, if you purchase a 20-year term life policy with $300,000 in coverage, then you will make your payments each month during that time. If you pass during that policy’s period, then your death benefit will pay out to those specified in the policy.
When purchasing a term life policy, experts say that you should probably opt for a policy that pays out 10 to 12 times that of your yearly income. This means that insurance can completely replace your income if something should happen to you.
Cash Value Policies
Cash value policies refer to any insurance policies that have a specific death benefit and also grow value in an investment account. Each time that a policyholder makes a payment, part of that money adds to the pot. The value of these insurance policies is separate from the death benefit, and beneficiaries cannot access the cash value of the policy if you pass away. Instead, you may want to sell your policy, in which case you would receive the “cash value” of the policy.
This cash value account is also protected from taxes, and it grows with interest, which can be determined by the insurance company and policy type. These policies may also be used as collateral for a loan. These policies are best for those who are young and have extra money to invest in a policy, but they want to sell later and pull out the value to buy a home or make another large purchase.
Can You Get Cash Out of Your Policy?
Most insurance companies sell a variety of policies, and some of these include cash value clauses. Anyone can sell their policies, but it may be difficult to transfer certain policies depending on the company and type of policy that you invested in. There are also some ways in which policyholders can use the cash value to pay off their premiums. However, not all policies work this way. For example, whole life policies typically do not allow you to use a cash value account to pay a premium unless you have what’s called a “paid-up policy.”
You can sell your policy for an insurance settlement, but this means that you give up coverage and any cash value that you held within the policy. If you have a high premium and don’t have any dependents, this may be a good idea if you need the cash. However, it’s always best to keep the policy and pay into it so that you can grow the value over time.
Can You Use Cash Value to Increase Your Death Benefit?
You don’t want to lose any value that you have paid into a policy. Most insurance companies have options to help you utilize the cash value of your policy. In some cases, you can actually increase the death benefit by converting cash value.
Have you thought about getting a new policy? What would you want to protect? There are many ways to use insurance policies to protect your family or invest in large purchases later on in life. It’s a great way to invest and ensure that your family is well taken care of.
Ready To Get Started?
Now that you know all the options available to you in regards to life insurance, get started today with a trusted Insurance firm. WRS Insurance is here to help.