Life insurance plays an important role in planning for the future, but choosing the policy that most suitably fits your needs can be challenging. When you start shopping, you will encounter a variety of options, which can quickly become overwhelming. To make an informed decision, you must have a basic understanding of how each plan works. Here is a breakdown of the most common types of life insurance.

Term

Term life insurance policies are designed to last for a specified number of years, and they don’t accumulate cash value. If you pass away within that time frame, your beneficiaries will receive a payout; otherwise, it will simply expire if you’re still living when the term ends. This is generally the cheapest way to purchase life insurance. You will lock in a rate for the duration of the policy and pay a monthly or annual premium. Term life insurance is typically a good choice for young families on a budget or those who only want coverage until the kids are grown or the mortgage is paid off.

Whole

Whole life insurance is intended to cover a policyholder for the rest of their life. It comes with a guaranteed premium, interest rate, and death benefit for the life of the policy and also has a cash value component. A portion of your premium will be converted into savings, which is allowed to grow on a tax-deferred basis. This kind of policy can be attractive for parents who want to buy coverage for their children at a low rate so they will have it at an affordable price when they get older. The biggest drawback of whole life insurance is that it’s the most expensive.

Universal

Like whole life policies, universal life insurance is permanent and has a death benefit and cash component where the funds can grow tax-deferred. However, universal premiums are flexible. This means you have the opportunity to choose how much of your payment goes towards the death benefit and how much is allocated to the cash value. It’s usually best to buy a universal policy at a young age to have the most time to build assets.

Taking time to learn about various life insurance policies and their benefits will help you make the right selection. If you are looking for quality coverage at a competitive price, contact Pearson & Barnes Insurance. They will ensure you find the policy that’s best for your long-term needs and financial goals. Their team of agents has more than 20 years of combined industry experience and a long-standing history of providing Somerset, KY, residents with superior products and services. Call (606) 679-1450 to set up an appointment, and visit their website to request a quote.