A life insurance policy is a contract in which a policy holder agrees to pay premiums to an insurance company in exchange for benefit payouts to its beneficiaries in the event of the insured individual’s death. Taking out life insurance policies on loved ones is a vital investment, as burial costs and the well-being of your loved ones could be in financial jeopardy.
While the investment seems simplistic, unless you are a licensed insurance agent, here are a few things that you may not know about life insurance options:
If You Need Cash, You Have Options with Your Policy
Some life insurance policies, such as whole and variable policies, have a cash value, which you can trade in the value of your policy and receive the amount of money in return. This option may benefit you, as the money invested in your life insurance policy accrues interest.
If you decide to take out a cash loan, the payout will be tax free. However, you will have to pay interest on the money back into the policy. If the money is not paid back into the policy before death, beneficiaries will not receive the benefit amount that was withdrawn.
Many Options Provide Lower Premiums
If you are looking for a lower premium option, a term insurance policy could be for you, as the cost is less than cash-value insurance policies. This type of policy provides coverage for a certain period of time. In most cases, this type of insurance will provide the most efficient type of coverage for the price and be enough to cover costs in the event of death. The younger you are, the cheaper your premium will be. Be sure to check with your insurance agent about the terms of your policy, as terms and conditions will vary.
You May Need More Coverage Than You Think
While policies that give millions in benefit payouts may seem like enough, you must consider how many beneficiaries you wish to provide for and how well taken care of you’d like them to be. Between paying off any remaining debts, college for children, mortgage payments and burial costs, this amount of money might not go as far as you think. A licensed insurance agent can help you calculate these sums to decide which type of policy you should choose.
These are just a few factors for you to explore as you consider what type of life insurance policy is best for you and your family. If you have any questions or would like information on how a life insurance policy can benefit you, contact Allstate agent Royce Williams by calling (615) 356-4800. Since 1989, Royce Williams Insurance has been serving families in Nashville for all of their life insurance needs.