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Choosing the Right Life Insurance Policy

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When it comes to choosing a life insurance policy to suit our particular needs we can often find ourselves overwhelmed and confused.

Narrowing down the best life insurance policy options available can make the decision easier.

You should consider term life insurance if:

– You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and what to ensure that there will be funds to pay for their university education, you might buy a 20 year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a policy for that period.

– You need large amount of life insurance, but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefit is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed or a new one bought. Unlike permanent insurance, you will not typically build equity in the form of cash savings.

Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.

You should consider permanent life insurance if:

– You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be 100.

– You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you can’t pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before it’s repaid, the insurance company collects what is due to the company before determining what goes to your beneficiary.

However, the premium in a permanent policy remains the same no matter how old you are, while term can go up substantially every time you renew it.

Please contact i3Group for any payroll related matters on 1300 725 647.

21 Oct, 15

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