Many people usually shy away from whole life insurance due to the plan’s expensive premiums and life-long commitment. Others simply do not qualify for it due to some pre-existing medical conditions. Whatever the case, it is good to know that you aren’t left without options when it comes to investing in your family’s future.
Here are five other investments that could be better for you if whole life insurance isn’t.
For many people who want life insurance but can’t afford whole life insurance, term life insurance is the perfect alternative. While whole life is permanent, term life isn’t, as it usually runs for a fixed term – about 10, 15 or 30 years. And perhaps what makes it inexpensive is that it doesn’t have the investment component known as a cash value. If you compare quotes online you will be able to see the difference in the cost between the two.
The way term life insurance works is quite simple. You buy a plan for a fixed period, and the insurer guarantees to pay your family a lump sum upon your death. If you die before the period is up, your family gets the death benefit. If you live and your policy expires, you forfeit the premiums – you can renew or start a new policy.
Sometimes if you want life insurance but whole life and term life aren’t an option, you can ask your employer. Some employers do offer life insurance policies to a group of workers known as group insurance. You just have to know how it works.
For example, your employer may offer to cover all the premiums until your death at a low fee. They can also give you a minimum they are willing to pay and ask you to cover the rest with your salary. You have to be aware that upon retirement or termination, you will lose the insurance – it is still better than nothing.
Insurers don’t like covering people with pre-existing medical conditions, especially if they’re serious or terminal conditions. You might find that you are denied term life or group insurance because of a medical condition you have. This is where guaranteed coverage plans come to save the day.
However, there are a number of things you need to know about guaranteed coverage plans. First of all, you will pay higher premiums because the insurance company is taking a huge risk by covering you. Secondly, because of this, the payout will not be as great as term life or group insurance.
This is the last resort when you have been turned down for other policies everywhere but still inclined to financially secure your loved ones with life insurance.
At this point, we are entering self-insurance territory, beginning with mutual funds. Mutual funds are basically investment accounts that tailor to your individual saving needs. The money you and others invest in the mutual fund are then invested in securities such as stocks and bonds.
These make up your investment portfolio and are subject to market pressures. For that reason, there is a risk involved since your mutual fund can shrink if the market decides to change direction on you. With that said, many people have been known to make money off of mutual funds, enough to cover their family after they’re gone.
A fixed deposit is one of the easiest and virtually risk-free investments one can make. A fixed deposit is a short- to mid-term investment. It can run from anywhere between a month to 60 months. Because there’s really no risk involved, the interest rates are not that high.
You and a bank agree on a sum you will invest and they give you an interest rate. The more you invest, the higher the interest rate. At maturity, the bank pays you interest – minus tax, of course.
There are other options that can help you secure your family beyond whole life insurance. It just depends on your needs and/or situation. From term life to fixed deposits, once you start looking, there is a high chance you will find a good alternative to whole life. And it just might be better for you.