The first decision you’ll have to make is whether you want a life insurance plan that builds a cash value or not. Whole and universal life insurance are two plans that build a cash value as you pay your premium. They are also permanent life insurance that stays with you as long as you are alive and still making the premium payments. By comparison, with a term life insurance policy, a cash value does not accumulate and it only provides coverage for a specific number of years. While having a cash value with your life insurance policy might sound attractive, you should know that you’ll have to pay higher premiums to get it. Some prefer to pay a much lower premium with a term life insurance policy and keep or invest the difference.
When buying a life insurance policy, it is also important to understand how much the face value of the policy is. The face value is the amount of coverage that your beneficiary will receive when you pass away with the policy still in effect. For example, if you buy a policy with a $100,000 face value, your beneficiary will get $100,000 from the insurance company when you die.
Life insurance policies can also have riders attached to them to provide additional forms of coverage. For example, you sometimes have the option of adding an accidental death and dismemberment rider to your policy. With this rider, if you die from an accident, the face value of your policy may be doubled when it is paid out. If you are dismembered in an accident and you survive, the policy will pay you the face value of the policy at that time so that you can use the money while you are still alive.
When comparing life insurance policies, you need to make sure that you’re comparing apples to apples. Make sure that the policies are the same type of insurance, they have the same face value and that they have the same riders attached to them. At that point, you can truly compare the premiums offered by different companies.