Most people do their best to avoid talking about life insurance as much as possible. It’s not much fun to think about what’s going to happen to your loved ones when you’re not here. The good news is that knowing how to invest in the right policy can give you some much-needed peace of mind, no matter where this complicated world might take you. One thing you’ll realize when you begin shopping for coverage, is that there are many different kinds of life insurance. Some options cover you for an extended period of time, or even indefinitely. Others cover a specific term and give you options to renew and roll your protection over in the future. Here’s what you need to know.
Term and Whole-of-Life Coverage
Usually, the biggest decision to make when you’re buying insurance, is whether you need term-based support or something that lasts for the entire length of your life. A policy that’s whole of life basically guarantees anyone dependent on you that they’ll get a payment, no matter when you pass on. On the other hand, term insurance only pays out if you pass away before your policy is over. While it might seem strange to opt for anything less than full life coverage, it can be appropriate in some cases. If you need enough insurance to cover you as you pay your mortgage payments, for instance, then you’ll only need support for as long as your mortgage exists. Because a whole-of-life solution is guaranteed to give you money at some point, it’s also more expensive than other policies too.
On the other hand, when you opt for a term, you get a payment that’s supposed to support your family for a specific expense when you’re no longer available. Some people get this kind of protection to help with things like mortgage and rent costs. Others might want to make sure that their family will have enough cash to deal with debts that exist after they’re gone.
Potential Add-Ons for Your Policy
Aside from the choice between part-time or full insurance for the course of your life, you’ll also have to decide if there are any other extras that you need too. For instance, some companies will provide special coverage for people who have terminal illnesses that run in their family. Other ventures might provide access to things like a modified endowment contract, or MEC. This is a tax qualification for a program where the premiums will exceed the tax law limits on a federal level.
The policy for IRS classification and taxation structure will change after life a insurance becomes an MEC. You’ll need to speak with a professional to determine whether adding an MEC into your protection will be a right move for you and your family. Most leading coverage companies will be able to give you some basic insights into the strategies that might be best for you if you’re going to be spending a lot of money on protection for your family. It’s always a good idea to consider your options carefully and compare what’s available before you sign on the dotted line.