BASIC TYPES OF LIFE INSURANCE
All policies are not the same. Some give coverage for your lifetime and other cover you for a specific number of years. Some build up cash values and other do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. Your choice should be based on your needs and what you can afford.
There are two basic types of life Insurance: Term insurance and Permanent insurance. Term insurance generally has lower premium in the early years, but does not build up cash values that you can use in the future. You may combine permanent life insurance with term insurance for the period of your greatest need for life insurance.
There are two basic types of life Insurance: Term insurance and Permanent insurance. Term insurance generally has lower premium in the early years, but does not build up cash values that you can use in the future. You may combine permanent life insurance with term insurance for the period of your greatest need for life insurance.
TERM INSURANCE
Term Insurance covers you for a specific term period that can be one or more years. Term insurance pays a death benefit only if you die in that term period. Term insurance generally will provide the largest death benefit for your premium dollar. It general does not build up cash value. You may be able to convert many term insurance policies for a cash value policy during a conversion period without new evidence of insurability. Premiums for the new policy will be higher than you have been paying for the term insurance.
PERMANENT LIFE INSURANCE
Permanent Life Insurance is a policy where the initial premiums are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up cash value that may be used in a number of ways. You can borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value, if you surrender the policy. You can also use your cash value to keep insurance protection for a limited time or to buy a reduced paid up amount of insurance without having to pay more premiums. You also can use the cash value to increase your income in retirement or to help pay for needs such a child’s tuition without canceling the policy. However, to build up this cash value, you must pay higher premiums in the earlier years of the policy. Permanent life insurance may be one of several types; whole life, universal life and variable are all types of permanent insurance.
WHOLE LIFE INSURANCE
Whole Life Insurance will pay a death benefit for as long as you live if your premiums are paid. Generally you will pay the same amount of premium for as long as you live. Initally premiums can be several times higher than you would pay for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years. Some whole life policies let you pay premiums for a shortened period such as 10 or 20 years, or until age 65. Premiums will be higher for these policies since the premium payments are made during a shorter period.
UNIVERSAL LIFE INSURANCE
Universal Life Insurance is a flexible premium,adjustable death benefit policy that lets you vary your premium payments. You can also adjust the face amount of your coverage, Increases may require proof that you qualify for the additional death benefit. The premiums you pay (less any expense charges) go into the policy and earn interest. Any additional charges are deducted from the account. If your yearly premium payment plus the interest your account earns is less than the charges, your account value will become lower. If your account keeps reducing, eventually your coverage will end. To prevent that, you may need to start making premium payments, increase your premium payments, or lower your death benefits. If there is excess in your account after the deducted expense charges, that excess will build up more cash value.
This is only a summary and you should consult with a licensed insurance professional before deciding on the amount and type of insurance policy to purchase.