-> Term, Whole And Variable Life Insurance. Which Type Of Life ...

by Guest Poster

Nsurance. Even saying this word makes some people cringe.  For the most part, you are familiar, and perhaps used to, the insurance you have on your car, house, and hopefully to pay your medical bills. It’s a part of your normal budgeting that you take for granted, and in the case of car and house, hope you never need to use.

Life insurance is part of most responsible people’s financial planning. Whether it is to make up for lost income, send a child to college, or provide for other loved ones, you should understand your options and choose accordingly.

There are two main categories of life insurance, Term and Whole Life. Term is the simplest to describe and that where we’ll start. Term is just that, a policy that has a fixed cost for a certain period of time, most often 10,20, or 30 years. For a 40-year-old male non-smoker, a $500,000 policy would cost about $250 per year for 10 years, $425 for 20 years, and $700 for 30 years. One might choose a certain term to match up with an expense that may go away. The birth of a child is often the time that one first considers the need for insurance, and a 20 year term policy fits nicely with the timing of raising the son or daughter and sending them off to college. The 30-year term, if bought at this age, will bridge the gap till retirement so a spouse (working or not) is not left with the sudden drop of income. The amount you choose to purchase is another discussion, too little and your family may have serious consequences upon your passing, too much and your throwing money away that you should be investing or otherwise using to enjoy life. For complete replacement of income, a good rule of thumb is to insure yourself for twenty times your income. As time passes and this number is impacted by inflation, your retirement savings should be growing so the total real value continues to increase. For others, a term that coincides with other life events, such as planned mortgage payoff, makes sense. Note: Many term policies come with a guaranteed renewal feature; you can buy a new term policy with no exam, but at the rate in effect for your age at the time of renewal.

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