Life insurance can be hard to understand, so we spend a lot of time talking about the different ways to buy it. I need how much? What does it cost? Will the people I give money to have enough to live well? What's the difference between term life insurance and life insurance with a cash value? Which one costs the least?
CASH VALUE LIFE INSURANCE POLICIES
Cash-value life insurance, like universal and whole life, gives you a death benefit and lets you save money without paying taxes on it. Permanent life insurance is another name for these types of policies, which are meant to cover you for the rest of your life.
Cash value policies usually have higher annual premiums than term life policies because a portion of each premium goes toward insurance and the rest is invested. The policy's cash value is what you can borrow from it or get if you give it up. These funds are great for saving for retirement and college, among other things, because they grow tax-free until you withdraw them, at which point you may have to pay some taxes on them. When you borrow money or take money out of your policy, the cash value and death benefit will go down.
EASY WAYS TO GET LIFE INSURANCE
The most basic kind of life insurance is term life insurance. You can buy coverage for anywhere from one to many years, and if you die during that time, the policy will pay out a death benefit. Many policies let you keep your coverage for as long as you want, even if you are 65 or 100 years old.
Young people like term life insurance because it gives them the most coverage for the least amount of money. Early on, the premiums are low, but they go up as you get older. For example, a $250,000 death benefit will cost less when you are in your 30s than when you are in your 50s. Because of this, term life insurance is usually a better deal if you only need life insurance for a short time.
