Comparing life insurance quotes can be a great way to accommodate the family budget while preserving its future financial stability.
Death and taxes are often proclaimed as two unavoidable facts of life. Most people prefer to not think about either one, but for people with a partner, children, or other dependents, contemplation of what will happen after death is crucial. Life insurance provides for your dependents financially if your income is lost due to death or an accident causing permanent disability. Buying a life insurance policy is particularly important if your partner stays home to take care of the children, but even two-income families need life insurance to preserve the financial stability of the family.
Whole Life Insurance or Term Life Insurance
The two main types of life insurance are whole life policies and term life policies. A term life policy, usually the lower cost option, covers you for a specific period of time, such as twenty years, at a stable price. A whole life insurance policy accrues cash value and pays dividends which can be used in different ways while the policy is in place. In addition, there are universal life insurance and variable life insurance policies which offer a combination of term life insurance and a savings element. Generally, whole life, universal life and variable life insurance policies are considered permanent life insurance policies because they remain in force until you stop paying the premiums or pass away.
Life Insurance Dividends
If you have a permanent life insurance policy with a mutual life insurance company, you may receive dividends based on the type of policy you own and the amount of the company’s profit each year, although dividends are not guaranteed.
Dividends can be received as cash, left on deposit to gather interest, or used to pay future premiums or to increase the value of your policy.
Borrowing from Your Life Insurance
When comparing life insurance quotes, it is important to recognize whether you are opting for a permanent life insurance policy or a term life insurance policy. All permanent life insurance policies accumulate a cash value and therefore can be an asset to borrow against.
The advantage of borrowing against a life insurance policy rather than taking out a personal loan is that you typically pay a much lower interest rate. Borrowing against your life insurance should only be done in the case of a true financial emergency. If you don’t pay the money back, your dependents will receive less when they make a claim on your life insurance. In order to make sure your beneficiaries receive the full value of the policy, you need to pay the money back as soon as possible.
Life insurance companies usually require a waiting period between buying the policy and being able to borrow against it. In addition, if the loan balance and accrued interest exceed the cash value of the policy, it will be terminated.
Comparing Life Insurance Quotes
Rather than preparing to borrow against a life insurance policy, families should carefully evaluate the costs and types of available insurance to make sure they are buying life insurance which is both affordable and appropriate for their financial circumstances.