We all know the benefits of having a life insurance policy. It provides financial cushion for the family should there be untimely death in the family. It is very important to provide for financial needs ahead of time so those left behind can not only survive, but thrive. That’s the main purpose and job of life insurance. By giving family members ample financial resources, they get time to adjust to their new living situations.
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Life Insurance Types
Basically there are two main types of life insurance people should consider; Term and permanent life insurance. Within permanent life insurance, there is whole life insurance, variable life insurance, universal life, and universal variable life insurance.
Term life insurance as the name states is an insurance policy that exists for a certain period. Most policy terms range from 5 years to 30 years. As long as you pay the premium on a timely manner, the death benefit and premium remains the same over the stated policy period. At the end of the term of the life insurance policy, either the policy ceases to exist or the premiums that you have to pay rises considerably more. Since term policies do not last a lifetime of the insured, they are much more affordable than comparable permanent policies. However, in the event that the insured person does not die during the term covered, no death benefit will be paid out and there is no return of premiums paid into the policy. Term life insurance policies lock in the amount of premiums so that we know exactly how much our premiums we need to pay. It can be paid monthly, quarterly, biannually, or yearly.
Permanent life insurance is similar to term in the sense that death benefit and the premiums remain the same. The main difference here is that there is no stated term and the insurance protection remains for the life time of the insured so long as there is no lapse in the premium payments. One key feature of permanent life insurance that is not found in the term insurance policies is that it has cash value feature. As premiums are paid by the insured, a portion of the proceeds is used to pay the cost of the insurance and the remainder is deposited into a cash account. Money in this fund will earn interest and build over time. For these two main additional benefits, whole life policies tend to be priced significantly higher. In a permanent life insurance policy, should you decide to discontinue paying the premiums, you get back whatever cash value that has been accumulated in your policy.
In a variable life insurance, death benefit changes according to the return of the cash value accumulated. The premiums that you pay are invested by the life insurance companies into various investments and the death benefit changes in relation to the return of these investments.
Universal life is an insurance policy that is flexible in the sense that both the premium and the face amount can be adjusted over the life on the insurance policy.
Universal variable life allows for investment of the cash value in traditional securities; stocks, money markets, index funds and bonds. The earnings within the policy are tax deferred. Premiums are flexible and cash value may be withdrawn or borrowed.
So which of the above policies should you buy? Well, it depends on your needs. Buy term insurance to cover your needs that have a shorter life span and buy permanent insurance to cover needs that are not expected to go away.
For instance, our children will leave home at some point and we will no longer need to financially provide for them. So the need to replace our income and support our children is better covered by term life insurance policy.
On the other hand, gifts to family or charity and final expenses don’t have end dates while we are living, so these needs should be covered with a permanent life insurance policy.
When shopping for life insurance, the lowest price may not always mean the plan offers the best deal. Fortunately, CheapLifeInsurance.org has partnered with reputable and reliable nationwide life insurance companies. This means that when you get life insurance quotes from us, you can be rest assured that whichever policy you choose, they will provide the coverage you need – when you need it.
At CheapLifeInsurance.org, we know that shopping for affordable life insurance can be confusing. With all of the different coverages and policies available, it is important to get as much information as possible before you purchase a life insurance policy for yourself, your family or your company. This is why we provide a variety of informative articles that are designed to make your life insurance decision as easy as possible.
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