When it comes to life insurance, everyone needs it. We know that life insurance can be complicated and difficult to think about, so we’ve broken it down for you.
Term Life Insurance
One of the most affordable life insurance plans that you can get terms life insurance. The word term means “temporary” or a fixed or limited period. Usually, this type of life insurance lasts for 5, 10, 20, or 30 years as a contract between you and the insurance company. Typically, you pay a monthly premium in exchange for the insurer paying a death benefit to your beneficiaries if you die during the timespan of the policy.
Many go for this insurance because of its affordability, protection for loved ones, and cover any debts you leave behind. However, cheap isn’t always the best, as term life policies can have some downsides. For instance, if you outlive the policy, you don’t receive any money, no tax-deferred cash value is generated, and you’ll still pay more than a standard term life policy despite a premium return. If you are older, once you outlive this policy, it can be more challenging and/or costly to obtain a new life insurance policy.
Whole Life Insurance
Also referred to as “straight life” or “ordinary life” insurance, this policy is guaranteed to remain in force for the insured’s entire lifetime or to the maturity date, provided required premiums are paid.
There are many benefits of this life insurance policy. Fixed annual premiums, a build-up in “cash value” that grows tax-deferred, cash value you can withdraw before death, and yearly dividends that can be used to buy more insurance or pay off your premiums.
That’s a lot of pros, but there are some cons to a whole life insurance policy. Cash value builds up very slowly over time with this policy, you won’t see huge returns because of the low fixed interest rate, and you may have high fees depending on the policy.
Index Universal Life Insurance
Index Universal Life insurance (IUL) is similar to a whole life policy. Your monthly premium is used to cover life insurance, and the rest goes into savings and investments.
This offers some flexibility with premium payments; you have more safety from loss because cash value grows at a desirable interest rate with a guaranteed floor. Also, the cash value grows tax-deferred, and like the whole life policy, you can borrow against or withdraw before death tax-free. The money can also be used as a living benefit. For example, to pay for college tuition, down payment on a home, or retirement benefits.
With this insurance, the downsides are caps on returns, typically at around 15%, and the insurance company can change the cap at any time.
Most people or small businesses that operate in a licensed field of expertise or industry, and work with the general public, should possess business insurance. This can include a doctor, lawyer, insurance agent, financial advisor, daycare, beauty salon or barbershop, construction, HVAC, engineer, tour guides, baker, bar, or restaurant, etc.
General and Professional Liability
Speaking of businesses, every small business needs general liability insurance. This policy protects against typical customer or client incidents, including bodily injuries, property damage, and advertising injuries.
Without business insurance, business owners may have to pay out-of-pocket for costly damages and legal claims against their company. An LLC creates a divide between your assets and your business. This means that even if you face a lawsuit, your assets should be safe. For that reason, some LLC owners may think they don’t need liability insurance. However, while an LLC does offer some protection to business owners, it’s not magic.
Professional liability insurance (PLI), also called professional indemnity insurance (PII) but more commonly known as Errors & Omissions (E&O) in the US, is a form of liability insurance. PLI helps protect professional advice and service-providing individuals and companies from bearing the total cost of defending themselves should they be found liable for the litany of mistakes that businesses can make. Essentially, it helps to cover losses that stem from errors made during the business, or information that may have been mistakenly left out during a business transaction.
Professionals that operate their businesses need professional liability insurance in addition to an in-home business or a business owner’s policy. This insurance covers more abstract risks, such as errors and omissions in the services your business provides. PLI can cover a mistake made by your company or employees. Most clients require professionals to show $1M in coverage per occurrence, so professional liability is a good idea to have.
In the end, whether you’re a business owner or a regular person, you should consider the many benefits of owning a life insurance policy. Protect yourself and your loved ones by making sure you’re covered.