Before you can think about saving money on your life insurance, make sure you know what you need. Life insurance is not like bargain shopping. Buying cheap life insurance that does not adequately cover your needs will do your beneficiaries no good. In addition to undergoing grief caused by the loss of a loved one, now they are financially challenged too.
If you’re looking for a less expensive alternative when it comes to life insurance, term life is the way to go. It’s a basic insurance policy purchased for a period of time. The time is usually between 1 and 30 years. The one caveat is that if the policy expires before you do, you don’t get your money back.
On the other hand, permanent life policies, which include but are not limited to whole, universal and variable, may cost more, but it also provides more. These policies, in addition to paying your beneficiaries upon your death, can be used as an investment tool. Most of these policies pay dividends and many policies also allow you to borrow from the accrued cash value.
Universal life policies have a provision under which you may modify the amount of insurance and change the monthly premium as your needs change. They offer more flexibility. The changes, however, must be within the policy’s terms and conditions.
The difference between term and permanent policies can be thought of as the difference between renting verses owning a home. In the short run, renting an apartment may be cheaper, but when your lease is up, you walk away with nothing but rent receipts and cancelled checks. However, owning a home, on the other hand, you not only have your basic shelter, you gain equity and may use the equity in your home for a variety of things.
If you currently have a term budget, purchase term until your financial condition changes. Remember, something is better than nothing.