Getting any form of life insurance is a big decision both financially and emotionally. Understanding the different types of insurance ensures that you purchase the one that is right for you and your household, no matter what happens in the future. If you are confused by the different types available to you and which one you should get, look no further than this handy guide for both term and life insurance.
Term Insurance
Term insurance is more temporary than life insurance and can last for any specified time frame that you wish. This is usually a less expensive option and can be used for a variety of reasons. The features that are included with a term insurance plan are:
- Only provides death benefits
- The benefits from the term insurance only apply in death if the policy is still ongoing
- Most affordable insurance policy
- Term periods include 5,10, 15 and 30 years
- Term insurance is more expensive the older you are, for example, those over 50 years of age will pay more
- Cover has to be renewed to continue after the policy ends
- May be used temporarily until life insurance can be purchased
- Can be changed to life insurance at any time
Life Insurance
Life insurance is very different from term insurance in the fact that it lasts for the entirety of your life unless you choose to stop the policy for whatever reason. The main features included in a life insurance policy are:
- You usually have to qualify for life insurance through a health examination
- Costs more if you refuse a health examination
- Takes, on average, 13 years to compile a decent amount of cash to be paid out after your death
- Some of the money may be borrowed or withdrawn during your policy if needed
- May save you money if you plan to keep renewing your term insurance
- Life insurance provides not just death benefits, but the cash value of what your family are entitled to after your death will keep rising as you make payments
Considerations for Life and Term Insurance
There are many factors to consider when taking out either form of insurance. If you are struggling to find which insurance is best for you, there are agents you can speak to who will be able to talk through everything and help you make the right decision. Here is everything you should consider when looking at choosing life or term insurance:
- Your age
- Your state of health
- Health expenses for those with a long-term serious illness
- Any current debts and mortgage
- Plans for death and funeral expenses
- Finances of your household
- Your children’s age
- You will decisions
- Your feelings regarding paying a term insurance policy to potentially lose out
- Your retirement age and plans
- The needs of your family in the future, e.g. university or college tuition
When looking at policies, you should look at any financial obligations you currently have as this will aid in making your decision. Calculate how much your mortgage is, pay off any debts outstanding and add in any living expenses; this will let you see how much your policy needs to give out if you should pass away. If life insurance isn’t financially viable right now but you want protection, a term insurance policy is great for bridging that gap and providing peace of mind.
When looking for either insurance policy, you should compare for the best offers. You can compare Term life insurance here to find the best deal for you. Those who usually choose term insurance are just purchasing their first insurance and perhaps can’t afford anything more for the moment. If you want coverage just until your children are old enough to leave college and set up a life for themselves, term insurance can provide that safety net in the case of an unexpected death, but it may mean you pay into a cover that never pays out.
The decision between both policies rests solely on your own personal financial situation, as well as what you want the policy for. If you are still unsure, speaking to an advisor can help you to choose which type of insurance is best for you.
