There are 3 types of Life Insurance (click here for video):
– Term Life Insurance – most commonly used for temporary needs e.g. when you have financially dependent children or spouse or parents, when you have a mortgage (instead of buying creditor mortgage insurance), or business, and need most insurance coverage for lowest payments. This insurance is to protect you if you were to die when others depend on your income. Most commonly used are Term 10 and Term 20 but other types of Term are also available.
– Permanent Life Insurance – it often accumulates cash value, it is used as long-term benefit e.g. to preserve the estate and pay the funeral expense. This insurance offers coverage for life and the payments will stay the same. There also are options to pay for 20 years, stop paying, and the coverage will continue for life without you paying for it anymore.
– Combination of Permanent & Term Life Insurance offers both long-term and short-term benefits. You can design your coverage to fit your specific needs, depending on the age of your children, how much mortgage, and for how long you will have it if there is a need to pay Capital Gain Taxes when transferring your estate to your children.
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