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Life Insurance

April 28, 2016Investments

You pay for auto insurance to protect yourself from the liability of a car accident, and you pay for homeowners insurance to protect your home. Just as you protect your car and home with insurance, you can also insure yourself.

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Life insurance refers to an insurance policy that protects your family financially in the case that the policyholder passes away prematurely. The policy will pay an agreed sum of money to the beneficiaries – usually the policyholder’s family – helping them to pay for burial expenses, debts, and living expenses. Life insurance is one way you can ensure your family is taken care of financially in the event of your death.

There are different kinds of life insurance policies available, so it is best to know which one will meet your needs and circumstances.

Term Life Insurance

Term life insurance is a policy that will cover you for a set period of time and then expire after the time period has passed. After the coverage expires, the terms of the policy will no longer be in effect. At that point, the owner of the policy will have to forgo the benefits of coverage or seek an extension. Extensions to these policies will usually be accompanied with an increase in the premium rate, as well as changes to the general policy terms. Some insurance companies might deny service to older individuals or to people who have had major illnesses. The length of the insurance term is determined by the buyer and can vary from 1 to 30 years depending on the needs of the insured person. Term insurance has a fixed premium, so you will pay the same amount of money for your policy each month.

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Term life insurance is one of the most affordable options. For example, a healthy 30 year old male could be insured for 20 years with $250,000 worth of coverage for as little as $13 a month. The cost of insurance will vary depending on the amount of coverage, the term length, your age, and your general health.

Whole Life Insurance

Whole life insurance is a form of insurance that is permanent, which means the policy lasts the life of the policy holder and never expires. The premiums for whole life do not change and are often more expensive than term insurance policies. Whole life insurance features steady premiums, guaranteed death benefits, and a cash value. One of the most attractive things about whole life insurance is the cash value. Most life insurance companies invest paid premiums and in return, your policy increases in value. The cash value investment will usually grow at a fixed interest rate and can also receive dividends. The investment portion will yield dividends to the holder in the form of better policy terms, discounted payments, and the ability to receive loans from your cash value.

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Universal Life Insurance

Universal life insurance is also a form of permanent life insurance that lasts the life of the policyholder. With universal insurance, you can choose to adjust the premium and the death benefit depending on your current financial circumstances. With universal insurance, you still have a cash value that grows at a fixed interest rate, but it’s considered more flexible than whole life insurance since its benefits and premiums can vary throughout the life of the policy. This type of insurance is good for people who want life insurance coverage for their entire life, yet desire a flexible premium.

Variable Universal Insurance

Variable universal insurance is another form of permanent life insurance. This insurance has the flexibility of universal life insurance while also building cash value. The cash value for this type of insurance is placed in various investments at the discretion of the policy holder.  As with other investments, if it performs well you will build cash value, but if it does not you will end up paying higher premiums to increase the face value of your policy.