Talking about your own death is never an easy conversation, but it's something you should consider if you have any family you'd like to provide for after you pass on.
Life insurance costs less the younger you are. Like most insurance policies, your premium will often be heavily dependent on your age.
Life insurance was initially created to protect households from facing financial hardship if the main breadwinner faced an untimely death. These days, life insurance is purchased by families wishing to provide for their loved ones following a death, even if there are two or more wage earners in the household.
Choosing to wait until you’re retired to start a life insurance policy will end up costing you much more than if you were to buy it thirty years in advance of your retirement where you'll see the most savings. This is why insurance experts suggest that the best age to buy a life insurance policy is before 35.
If you’re in the market for a life insurance policy to provide for your family should anything unexpected happen, check out the differences between the two main types of life insurance policies below.
One of the two most common life insurance types is term insurance.
Term insurance means your life insurance policy will cover you over a term, or over a set period of time. A term life insurance policy will have an expiration date at which you can choose to renew the policy.
Typically, life insurance premiums for terms are less expensive than the permanent option.
Policy terms can range from 10, 15, 20 to 30 years of coverage. Once your term ends, your policy will typically renew on an annual basis until the age of 95. Renewals usually come with an increase in premium.
Every life insurance provider will be different, so it’s important to understand their specific policies and rules before agreeing to a term agreement.
Whole-life insurance almost explains itself – it's the permanent life insurance option.
This type of insurance has no expiration date and covers you as long as you are paying your premiums.
The value of this policy can change over time, but will typically cost you more than term life insurance coverage.
Whole-life coverage accumulates in cash value and can be borrowed against for various reasons, but any money borrowed will see an interest charge from the insurance provider. Generally, premiums on this permanent life insurance policy are fixed and guaranteed until the day you die.
Because it covers you until that inevitable day, the premiums on whole-life insurance are usually higher than other types of life insurance.
For younger parents, whole-life isn’t recommended as it can be a bit pricey for a growing family.
Those looking to purchase a life insurance policy earlier on in life should find insurance companies that allow a conversion from term insurance to permanent whole-life insurance, once the policyholder is ready to adjust their coverage type.