Life insurance is one of those things that no-one likes to think about, but everyone needs at some point in their life, sooner than later. Ultimately, while you don’t want to have to imagine what your loved ones are going to need to do if you pass away before they do, it pays to be prepared for the future. An insurance policy will ensure that you have a safety net in place for your loved ones, so you can stop thinking about your eventual demise, and start enjoying every moment of your life.
Of course, just like many products in today’s financial world, there’s more than one kind of life insurance coverage available, and each option comes with its own pros and cons to consider. If you’re exploring your potential policies for the first time, here are 3 options to look into.
Whole of Life Cover
One of the most common forms of life insurance is whole-of-live cover. Basically, this kind of policy guarantees payments to dependents in your policy regardless of when you might pass away. There are plenty of other forms of cover that will only offer support if you die before a specific date or time.
If you’re the kind of person who wants insurance to offer protection for the length of your mortgage, then term products are probably more likely to appeal to you than whole-of-life – which can be more expensive. On the other hand, if you need consistent peace of mind no matter what might happen in your world – then whole of life is the option for you.
Modified Endowment Contracts
MEC Insurance, or a modified endowment conference is a kind of cash value life insurance contract where the premiums you pay might have exceeded the amount you need to stick to keep all the tax benefits associated with having a cash value policy. When you adjust your contract to an MEC environment, distributions of cash are taken from your taxable gains instead of being taken from your non-taxed contributions.
In simple terms, your withdrawals from a MEC will be taxed as standard income, usually at the highest rate for investments, rather than being treated as non-taxable cash. While these solutions aren’t right for everyone, they’re great tools for wealthy clients with a lot of money and estates that they want to pass onto people in the future.
Increasing Term Insurance
A lot of people consider things like decreasing term coverage when they’re looking for protection during the course of a mortgage or long-term loan. For instance, if you’re getting coverage that will pay off your mortgage in case you die before you’re finished covering the cost of your house, then you won’t need to pay the same amount every year, because the amount left to pay on your mortgage will decrease. However, with increasing-term policies, you pay a little more each year to ensure that you can continue to deal with things like the price of inflation and put more cash towards your payout in the future.