A Guide to Purchasing Life Insurance

Bolster your estate plan with one of these three life insurance policies.

Life insurance policies are designed to provide financial support for your family, in the event that you or your spouse pass away. Typically used to cover the cost of raising your children, education, funeral expenses, paying off outstanding debts, continuing a family business or securing your spouse’s plan for retirement, the decision to purchase life insurance is easy. The question is, finding the right plan based on your priorities.

Breaking down the most common types of life insurance

Term Life Insurance
As you begin researching life insurance policies, term life insurance will likely be near the top of your list. Term life insurance provides coverage for a designated period of time. Nerdwallet recommends choosing a term that coincides with the years your family would be most financially vulnerable, along with an amount they would need if you were no longer there to provide for them. In most cases, term life insurance is purchased during the years when your family would need financial assistance in the event of your death. The term of the policy is normally terminated once your children are no longer financially dependant on you, and once you have saved enough money for retirement.

2. Whole Life Insurance
Unlike term life insurance, a whole life insurance policy covers your entire life. One of the biggest differences between whole life and term life insurance is the investment opportunity that comes along with it. This component guarantees a return on the amount of cash accumulated throughout the life of the policy, which is distributed to your beneficiaries after your death. While this payout seems like a great opportunity, Consumer Reports suggests holding off on the temptation, as whole life insurance premiums can be up to 10 times higher than term life premiums. For this reason, whole life insurance policies are best suited for the financially comfortable who wouldn’t be impacted by paying a higher premium.

3. Universal Life Insurance
Universal life insurance combines certain features of both term life and whole life policies. Like term life insurance, universal life insurance provides flexibility in terms of both premium and the level of coverage. These policies also offer an investment element that provides beneficiaries with a guaranteed cash payout that reflects the amount accumulated over the life of the policy. The key differentiator is the cash value can be used to cover a premium payment, depending on the policy’s potential cash value. Even though universal life policies allow access to cash values, the downside is their flexibility leaves room for higher volatility in terms of premium and interest rates.

Life insurance is a component of the estate planning process that should be considered by anyone who has family who would be negatively impacted financially in the event of their passing. If you need help navigating your life insurance options, contact the attorneys at Anselmo Lindberg & Associates. Our team of estate planning attorneys will help walk you through the process.

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