A Brief History
In 1962, the Phoenix Candy Company released the Now and Later bar. Each bar of candy included several individually wrapped taffy squares. The idea was consumers could eat some taffy right away and save the remainder for another time in the future. Now and Later bars satisfy both your current and future needs to satisfy your sugar craving.
What does this have to do with life insurance?
Financial planning requires us to consider our needs both today and for the future. When it comes to life insurance, making the wrong decision now can have adverse financial impacts down the road. Understanding your options before you purchase a life insurance policy will help you make a sound decision.
Term Insurance
Term life insurance policies provide protection for a fixed number of years. Policies are most often issued in 5, 10, 20, and 30-year terms. The majority of term insurance policies maintain a level death benefit and premium throughout the duration of the term.
Term life insurance is the cheapest form of coverage and is ideal for protecting dependents from the burden of debt and lost income if they were to pass away. The length of coverage purchased should end when your dependents’ reliance on your income has disappeared. This is usually at the end of a mortgage, children’s college graduation, or retirement date.
Whole Life Insurance
Whereas term insurance is temporary coverage, whole life insurance is a form of permanent life insurance. The death benefit of a whole life insurance policy is guaranteed for as long as you live along with your premium, so long as you continue making premium payments on time.
While whole life insurance is more expensive than term insurance, over time a whole life policy will build cash value. Cash value can be used to loan against (you pay yourself the interest) or cash out at a later date if you wish to surrender the policy. Whole life insurance can provide needed funds for burial expenses, to replace lost retirement income for your spouse, or to make a charitable contribution.
Choosing a Policy
Every family’s financial needs and goals are different. Choosing the best life insurance policy will depend on who is dependent on you today – will there be anyone dependent on you in the future, and are there any charitable wishes you seek to fulfill. But most importantly, life insurance should never be about you… but for those you may leave behind.
