Smart Tips for Blending Permanent and Term Life Insurance
Obtaining a life insurance policy is a smart way to give your family peace of mind, however it can also cost you a substantial amount of money, especially if you are looking at a policy that will provide you coverage for the rest of your life. One way to reduce these costs is to look at taking out a blended life insurance policy. This type of life insurance combines both permanent and term life insurance together in order to create a sort of hybrid policy. The goal of doing this is to reduce the cost of your annual premiums. Here are some tips to keep in mind when looking at blending a term life insurance policy with a whole one.
The Difference Between Term and Whole Life Insurance
The two main forms of life insurance that you would be blending together are term and whole life insurance. Term life insurance only covers your family for a specific period of time, however it generally costs less then a whole life insurance policy. A whole life insurance policy on the other hand does not expire during your lifetime.
The Basics of a Blended Life Insurance Policy
The future dividends that are paid on a policy that is blended are used in order to change term coverage into whole coverage. For example, if you needed $600,000 worth of life insurance coverage, you would take out $300,000 worth of term life insurance and then $300,000 worth of whole life insurance. Every year the amount of term life insurance would decrease as the amount of whole life insurance would increase until your policy would eventually become entirely a whole policy.
Determining Your Individual Needs
According to an article by Fox Business, one of the first things you need to do in order to determine if a blended life insurance policy is right for you and your family is to assess you and your family’s needs. For example, if you want to have coverage for your young child up until they graduate college, then you may need nothing more then a term life insurance policy. On the other hand, if you are raising a special needs child who will depend on you throughout his or her life then a whole life insurance could suit you better. However, if you are raising both these types of dependents then a blended policy may be your best option. In order to determine if you need a combination of the two, it is best to use a needs-based approach. This approach will take into consideration the expenses that your dependents need if you passed away tomorrow.
Find a Reputable Life Insurance Company
Experts highly recommend that if you are interested in a blended life insurance policy, you ensure that you purchase one from a very reputable company. This means that the company has a great history of paying off their dividends as well as a solid financial record.
Have an Advisor Review Your Policy
Getting an advisor who is independent of your life insurance company to review your policy is also a good idea when taking out a blended life insurance policy. This advisor should not have any motivation for you to purchase the policy, as this way he or she can give you honest advice as to whether or not the policy is a fit for you and your family. This is due to the fact that when it comes to a blended policy, the difference between an outstanding life insurance policy from a very reputable company and just a decent policy from an okay company is substantial.
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