Many people quickly gloss over when it comes to life insurance. I was one of those people who did not consider the importance of life insurance when I was in my early twenties. When I got married and started a family, I slowly realized that my family will not be financially protected if something bad were to happen to me. That’s when I realized that I needed to find a way to financially shelter my family if I were to die. That’s when I quickly turned to life insurance. One of the toughest decision for me was what type of life insurance to get. Both term life and whole life insurance had pros and cons. I eventually ended up getting life insurance that comprised of both of these two types.
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What is Life Insurance?
According to the Wikiapedia, “Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the “benefits”) upon the death of the insured person.” It benefits the living person usually a spouse or a family when the insured person dies unexpectedly. Life insurance is divided into two types: Permanent (Whole) Life or Term Life.
Pros and Cons of Whole Life
Although whole life insurance is much more expensive compared to term life (higher premium rates), I really liked the investment aspect of whole life where it builds cash value every year as long as you continue to pay annual premium. When enough cash value is accumulated via dividends, you have the option to stop paying the annual premium and still get the life-long protection. This is the main reason why I decided to get whole life as part of my total life insurance portfolio. Obviously because the cost is too high for whole life, I had to balance it by purchasing the term life.
Do you currently own life insurance? If so, then what does your life insurance portfolio look like?