Final answer:
Term life insurance is recommended for Cameron, as it offers a cost-effective death benefit for a specific period without accumulating cash value. This aligns with his need to cover the debt on his vacation home in case of his death without additional cash expenditure for insurance features he does not require, such as borrowing against the policy.
Step-by-step explanation:
Cameron is looking for a life insurance policy that offers a death benefit to pay off a loan for his vacation home in the event of his untimely death, while also being the most economical option available.
The most suitable type of life insurance for Cameron's situation is term life insurance. This type of policy provides a death benefit for a specific period, which can be aligned with the duration of the loan. Unlike cash-value or whole life insurance, term life insurance does not build cash value over time, which makes it more affordable and straightforward for someone with limited cash who wants to ensure their debt is covered.
Life insurance companies typically have funds on hand from policy payouts and may offer policyholders the option to borrow against their policies. However, this feature is pertinent to cash-value life insurance and not term insurance. Cameron's focus is solely on the death benefit to pay off the loan, not on building cash value or borrowing against the policy.
Furthermore, underwriting considerations such as family medical history, age, and lifestyle would affect the premium rates for life insurance.
For example, individuals with a family history of cancer may pay higher premiums than those without. Nonetheless, term insurance remains the most cost-effective option when the primary goal is to cover a debt for a specific period without the need for cash value accumulation. It's essential for Cameron to consider the policy term length, which should at least match the duration of his loan, to offer sufficient coverage.
Having several types of insurance can provide comprehensive protection for various aspects of an individual's life, including health, automotive, property, and life. It’s prudent for individuals to assess their unique insurance needs and choose the right mix of policies to provide financial security for their loved ones.