SmartMoney Monday: Life Insurance

SmartMoney Monday: Life Insurance

HONOLULU (HawaiiNewsNow) - There are so many kinds of life insurance: term, whole life, universal life, variable life. Where does a person start? For today's SmartMoney Monday, we're continuing our discussions about a very important topic: life insurance.

Let's start with the basics. The most basic life insurance is called term, because it lasts for a specific term of time, such as 20 years. So why would someone want life insurance that only lasts for a 20 year term?

Let's say you're starting a family. With 20 year term insurance, you get the peace of mind knowing that, if anything were to happen to you, you would have life insurance to provide for your young family for 20 years while the children are growing up.  After 20 years, generally speaking, the term would be up and the coverage simply stops. There's no cash value at the end of the term. That's why term life is more affordable.

Policies like whole life or universal life are types of policies that we refer to as permanent life insurance. Unlike term, which is temporary, permanent policies, like whole life, are designated to provide you with protection for your entire life. Another benefit of permanent life insurance is that in addition to providing lifelong protection, they have a cash value component which can be used for investing, loans and withdrawals.  Many permanent policies also allow for the addition of what we call "riders" – which provide you with the ability to add on additional features such as long term care coverage, which 7 out of 10 people will need during their lifetime.

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