Understanding Your Life Insurance Options

This Is A Guest Post With Information Sourced From Genworth Financial:

Life Insurance is one of the most reliable methods to ensure your spouse and children are financially protected in the event of your untimely demise.  While the thought is never a comfortable one, it’s important to reflect on the “what ifs” if something were to happen to ensure your family’s assets and future is covered completely.  A comprehensive life insurance policy can ensure certain things are covered, such as your children’s college tuition and other educational expenses, mortgage payments on your family home, and even small business expenses can be paid without a significant burden on your spouse or children after you are gone.  Those are just few of the reasons why it is worth investing in life insurance.

As it happens there are a variety of options when it comes to life insurance and there are no one-size-fits-all options.   There are three main types of life insurance policies; whole, term and universal, each one serving different needs and considerations for both individuals and families.  It is important to understand both the pluses and minuses with each option to ensure you have the right plan for you and your family.

Term Life Insurance is attractive because it’s the least expensive policy out there. Term Life insurance works by maintaining a certain premium for a distinct period of time. At the end of that time period, you can opt to continue coverage with a premium that increases annually. There are guarantees that premiums will remain fixed, which is especially useful if you have a fixed budget.

Whole Life Insurance offers a guarantee on the death benefit and a guaranteed cash value for a guaranteed premium.  This is often most expensive kind of life insurance, but may pay dividends (refunds of unneeded premium) that can be used in a variety of ways. In addition, Whole Life Insurance products within your 401k offer tax free “cash values.”

Universal Life Insurance is a more flexible policy. If your monthly income is variable this might be a better option as you can adjust the premiums per month if your income varies over time. There may be a death benefit option that can be either increased or reduced as needed, which is important to consider if your children are of younger age. Universal Life Insurance also allows you to maintain certain levels for lengthy periods of time, but then reduce the benefits when your children are grown and non-dependent. And like Whole Life Insurance, Universal life Insurance product may also offer tax free “cash values” within your 401k.

The single most common retirement mistakes for most are not planning early enough and not having enough life insurance.   Luckily, there are many free budget tools available, including Genworth Financial’s Life Insurance Calculator, that can help you organize and define a policy that makes sense for you and your family.  Your own mortality may not be the easiest topic to think about and discuss, but one thing is certain, you will breath a sigh of relief in knowing that your family will be protected no matter what the future holds.