Choosing a Life Insurance Policy for Your Unique Needs

Life insurance policies pay death benefits to your designated beneficiary when you die. Life insurance policies can protect your spouse, dependents, or others from financial problems after you pass on.

There are several types of life insurance policies. You must understand the difference between the different life insurance policy types available (term life insurance and whole life insurance) to ensure you choose the best insurance policy for your needs.

What is term life insurance?

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Term life insurance policies cover the policyholder for a finite period of time. Term life policies have no cash value and expire after the term is complete. The primary reason people acquire term life insurance is to provide financial protection for their dependents. If you die unexpectedly, the death benefits will protect your dependents from financial hardship. The death benefits paid to your beneficiary are tax-free.

One of the benefits of this type of policy is that the premiums don’t change. Term life policies also offer higher death benefits. Policyholders can renew their term life insurance; however, they must requalify. Anyone with a serious health issue may not qualify for this type of policy.

What is permanent life insurance?

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Two primary distinctions separate permanent life insurance (also known as whole life insurance) policies from term life policies. Permanent life insurance doesn’t expire, includes a savings option, and is available as a whole life or universal life policy. With a whole life policy, savings grow at a fixed rate over the life of the policy. The savings for a universal life policy fluctuate with market rates.

Policyholders do not have to pay taxes on the savings portion while they’re alive unless they opt to cash out the policy.

Search for a life insurance company that sells the type of policy you need.

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The easiest way to generate life insurance quotes for policies is to use a life insurance comparison tool. The tool prompts you to provide information about your age, gender, height, weight, and location. You also need to identify the amount of coverage you want and provide general health information. Once you provide all the requested information, the form generates a list of life insurance quotes. You can compare the benefits and premiums for each life insurance company and the type of policy offered. Once you determine how much life insurance you need, you can choose a policy from a reputable life insurance company.

How can a life insurance policy be used?

Policyholders can borrow funds from the savings portion of their permanent life insurance policy. Borrowing these funds is tax-free because you’re expected to repay the loan.

Permanent life insurance policies have a cash value. Policyholders can opt to cash in their policy and receive the cash value. The policy is terminated, and the beneficiary will not receive death benefits when you die, but you’re free to use the funds however you choose. While your life insurance policy can play an important role in ensuring your beneficiary’s financial well-being, if you have savings or trust funds in place, you may not need life insurance benefits to cover expenses when you die.

One drawback of cashing in your policy is that the cash value is lower than the death benefit. If you need to sell your policy due to a chronic or terminal illness or financial hardship, you can consider pursuing a viatical settlement or a life settlement. Viatical settlements are reserved for terminally or chronically ill people with a life expectancy of two years or less, while any policyholder can pursue a life settlement. Viatical settlements offer the highest purchase price, although life settlements still pay more than you would receive if you cash in your policy. Once you secure a viatical or life settlement, the third-party buyer becomes the beneficiary and assumes responsibility for any remaining premiums owed.

Protecting your health can help you qualify for life insurance.

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One way to ensure you can obtain a suitable life insurance policy from your insurance company is to look after your health. It’s harder to obtain a policy if you engage in high-risk activities, such as skydiving or bungee jumping. Health risk factors, such as smoking or obesity, may also jeopardize your ability to qualify for a policy. You can help yourself with appropriate nutrition for injury recovery that expedites the healing process and enables you to regain mobility and prevent muscle loss through physical activity. You can also use natural supplements for pain reduction. Consuming healthy, nutrient-rich foods, like lean meats and berries, with zinc, vitamin D, and omega-3 fatty acids will help your body repair tissue and reduce inflammation. You can help repair muscles by increasing your protein intake as well.

Choosing a life insurance policy begins with identifying your needs and understanding the different types of policies available. Using a life insurance comparison tool will help you locate suitable policies and find an insurance company.