Best life insurance companies for 2021
There are two main types of life insurance: “term life” and “whole life”. Although both offer a death benefit, they have some important differences.
Term life insurance
Term life insurance is a type of life insurance that is effective for a specified period. It pays a death benefit to your named beneficiaries if you die while coverage is active. It is only a life insurance product, with no investment component.
Term life insurance is much more affordable than whole life insurance. This is especially true if you are shopping around for the best life insurance companies. In fact, whole life insurance premiums often cost four times as much as a term life insurance policy. However, term life insurance gets its name from the fact that it is only in effect for a limited period of time. It is common for policies to have a term of coverage of 20 or 30 years.
If you die while your policy is in force, the insurance company will pay a death benefit. This money goes to the person you designate as the beneficiary. You can choose the amount of your death benefit. Some policies could provide millions of coverage. The best life insurance companies offer you a wide choice of coverage amounts. However, the higher your death benefit, the higher your premiums.
If you do not die while your policy is in force, your policy will simply expire at the end of the term. Your death benefit will never be paid. With the best life insurance companies, you may have the option of purchasing a guaranteed renewable term insurance policy. This means that you can extend the duration of your coverage if you wish. But the premiums could increase when you renew your life insurance coverage.
Whole life insurance
Whole life insurance is a type of life insurance policy that stays in place for your entire life as long as you pay premiums. As long as you don’t let your policy expire, your insurance will pay a death benefit upon your death. Whole life policies also have an investment component and acquire a cash value against which you can borrow or cash out.
You won’t have to worry about the possibility of renewing your coverage. And you won’t have to wonder if your premiums will go up. Whole life insurance policies are much more expensive than term life insurance. This is true even with the best life insurance companies. But as long as you keep paying premiums, your beneficiaries end up receiving the death benefit.
One of the reasons that whole life insurance policies are more expensive is that they are also an investment vehicle. This is true even with the best life insurance companies. Your policy accumulates a cash value over time. You may be able to access it. You can withdraw some of the money, borrow against your insurance policy, or surrender your policy.
There are tax advantages associated with investing in a whole life insurance policy. However, many financial experts believe that you can get a better return on your investment elsewhere. Most recommend that you purchase term life insurance from the best life insurance companies and separate your investments, unless you need life insurance coverage.