When people feel that they need to leave tangible evidence of their life behind them generally you will find that people look at different life insurance policies. As these policies all have various differences it is best to know some facts about the types of life insurance that you can get. There are about 4 to 5 different major types of life insurance that most insurance companies can provide you details of.
Policies differ from whole life insurance policies in that they offer some flexibility to change the premium payments and death benefit amount. Even though premium payments are flexible, a minimum premium is required to keep the life insurance coverage in force. Policies are sold with various premium guarantees. The longer the guarantee, the higher the initial premium. Policies have cash value or a savings feature. Whole life, universal, and variable insurance are types of permanent life insurance.
Term insurance is the simplest form of life insurance. The insurance company would pay the assured amount only in case of death that occurs during the term of the policy. Term life insurance is so named because it offers a set coverage amount for a limited “term” or period of time, typically between 1 and 30 years. That means that if you keep current on your policy premiums and you die within the term of the policy, your beneficiaries will receive the set death benefit (i.e. Term insurance is often the best decision for most consumers, especially for those with modest incomes and large needs. The first phase of financial planning, forming a secure foundation, usually begins with establishing an emergency fund, having adequate term life and disability insurance, and maximizing IRAs and employer sponsored retirement plans.
Term insurance provides a death benefit for only a specific period of time. If you die during the coverage period, your beneficiary (the person you named to collect the insurance proceeds) receives the death benefit (the face amount of the policy). Term life is the easiest to understand type of life insurance available. Simply put, it pays out the selected benefit if the insured dies during the selected term – which is usually from 10 to 30 years. Term life insurance is considered to be the unique and new form of life insurance; it is also regarded as clean insurance safety because it builds no cash value.
There is an important fact that you should keep in mind about these types of life insurance policies. This fact is that each insurance company has different ideas about what these types of life insurance policies will cover. And you will also find that these same companies will also have various ways of looking at the policy depending on the state you are in.
Level term insurance guarantees a fixed payment if you pass away within an agreed period of time. This is perfect if you want to ensure that your children can finish university without the risk of your financial aid disappearing, or waiting until your partner reaches a pensionable age.? Decreasing term insurance is used as a way to guarantee that a mortgage will be paid off in the event of your death. Level term life insurance policies have become extremely popular because they are very inexpensive and can provide relatively long term coverage. Most level term life insurance policies contain a guarantee of level premiums. Level term insurance is simple and straightforward. The insured wants a death benefit amount that may be too expensive if provided by permanent insurance.
However before you start panicking you might still want to get a rough idea of these types of life insurance policies. This way you will be prepared to look for the terms which identify the policy for ones that are recognizable to you. Well before we look any further you should know what these life insurance policies are in general called. You have Term Life insurance, Universal Variable Life Insurance, Whole Life Insurance, Variable Life Insurance and you also have Universal Life Insurance.
Premiums may be fixed or flexible. The death benefit and cash value vary depending upon the performance of funds invested. Premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy. Premiums are split two ways: part of the premium covers the cost of the policy, and the remainder is invested in the insurance company’s general portfolio to earn interest tax-deferred. This type of insurance usually guarantees a minimum interest rate on the balance that is invested.
In each of these life insurance policies you will find that there are differences. These differences can be seen as you examine each policy. For instance you will find that each of these policies has a different insurance policy rates. Of these many policies you will notice that you can arrange matters so that your dependents will be able to claim a good deal.
Permanent Life Insurance is a type of life insurance that stays in force for your entire lifetime, as long as you pay the premiums, or until all premiums are paid up. Premiums paid may decrease over time, since some insurers pay out a dividend which may be used to pay for some of your premiums. Permanent policies add a cash value component, whereas temporary (or term) insurance does not. Permanent, traditional, universal, variable and variable universal might also be terminology that can confuse and mystify. Individual and group type insurance also differ significantly.
Now in the types of life insurance you should look more carefully at how the policy will work for you. For instance in whole life insurance policies you will discover that the premiums are set for the entire period of your life. Universal life insurance is considered as being a very flexible life insurance policy. The term life insurance is known to be one of the simplest and yet the least expensive policies that you can find.
About the author
Vern DeFlanders is webmaster of nsuranceinfo.com and co-author of the New e-Book, Annuities: The Shocking Secrets Revealed