Life Insurance types
A short overview of different types of life insurance:
Although life insurance is purchased for yourself, your dependents are the ones who typically benefit from it. Life insurance provides your dependents with the security to protect the family home, should you die. The proceeds of a life insurance policy, known as the death benefit, provides the financial resources for the family home to continue to run as closely to normal as possible. The money that is realized from the life insurance also enables the family to repay any debts that have accumulated.
Term Life Insurance provides this protection for a specific amount of time. The term varies according to the policy and the provider. Typically, the policy is renewable upon the conclusion of a term. Terms can last for as little as one year and as long as twenty years.
The premium due on a term policy generally varies according to the individual’s age. Typically, the premium is a lesser amount in the earlier years of the policy. This is usually helpful to individuals who are younger and have a large amount of debt. The lower premium allows the individual to acquire a larger policy with a greater amount of coverage for what amounts to an affordable cost.
Permanent insurance policies go by several different names including Whole, Universal, Variable, Ordinary, and Adjustable. Permanent life insurance policies are designed to last for a long time. As long as the premium is paid, the policy stays in effect. If you don’t intend to hold onto the life insurance policy for a long time, it might be better for you to go with term insurance.
Many whole life policies feature a cash value. This is also referred to as a cash surrender value. In the event that the policy holder needs some ready cash and decides to turn in his policy, he can redeem it for the cash value that it has earned to date.
In order to determine which type of life insurance policy is best for you, consider your needs. Are you getting the policy to cover household expenses for remaining family? Do you want the policy to enable your spouse to raise your children in the family home in the event of your death? Do you want a term life insurance policy to be in effect simply to pay off your debts should you die? Think about these and other questions before deciding which policy is the right one for you.
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Many people ask me how should they picture life insurance.
Well, picture a crate. In this crate, you put a certain amount of money that you give to the insurance company. They than deducts the monthly insurance and administration costs and the surplus is invested in an account of your choosing many insurance companies offer guaranteed minimum interest rates (usually around 3-4 %) but it can be higher.
Now this policy is not without risks, many universal life policies have an escalating insurance costs in order to maximize the policies cash value build up in the early years. If the policy does not grow at you anticipated rate of return you could be left with an empty crate and no insurance. This type of policy is often geared towards high income earners who are looking to defer tax and already have their financial house in order.
Think about it.