Life insurance is purchased to pay a benefit. A dollar amount to be paid to your beneficiary upon your death. You can also save money with it. There are several types of life insurance policies. This article will provide a summary of each type as well as some benefits that it can offer to your particular situation.
Insurance companies price life insurance based on your health and age. Insurance companies assume that you will live statistically for a certain age and in a given health condition. They adjust their prices accordingly. Your acceptance by an insurance company will depend on how your health is reflected in their costing plan.
You may be able to get additional benefits, such as savings or tax planning. The key is to choose the right policy type for you. These are the most popular types of policy.
Term insurance
There is no savings component, so there is no cash value. The premiums, i.e. The premium you pay to purchase the policy covers only the risk that you die during the year. I.e. You’re paying for what’s called “pure” insurance.
Many insurance companies offer low premium term insurance. Premiums may remain level (i.e. For a period of 5, 10, 15, 20-25, 25 or 30 years, premiums may remain constant (i.e. These policies can be affordable and provide long-term coverage.
Certain level premium term policies include a guarantee that your premiums will remain the same, while others do not. The insurance company may surprise you by increasing your premiums, which is the amount you have to pay to keep your policy in effect. This can happen even though you had expected your premiums would remain the same. You should read the policy terms.
Whole Life Insurance
Permanent insurance is this type of policy. It’s meant to be in force for the rest of one’s life. The premiums for this policy are generally the same throughout one’s life. Premiums for this policy are generally higher in the first years than for term insurance policies. These policies have a cash value, which is essentially a cash reserve. It has a savings component that policy owners can access via surrenders and policy loans.
Premium term insurance returns:
This new type of coverage combines low-cost, term-like premiums with guaranteed refunds of premiums paid during the level period. Assuming the insured is still alive at the end of this level term, it is a new type of coverage. These policies are typically significantly cheaper than permanent insurance. They may offer cash surrender value if the insured dies, but they are often significantly less expensive than permanent insurance.
Universal Life Insurance
This is also a form of permanent insurance. However, it differs from Whole Life in that it itemizes and delineates the protection, expense, and cash value elements. This gives policy owners more flexibility to adjust the premium or face amount to meet changing circumstances.
Insurance for a Survivor or Second to Die:
This can be offered as Universal Life, Whole Life or the death benefit of two individuals. Usually, a husband or wife. This allows it to pay estate taxes at the death of the second person. Because of the unlimited marital deduction in estate tax, most people arrange to pay very little or none estate taxes upon the death of their first spouse. Because it is usually less costly than individual coverage for either spouse, this coverage is very popular.
You may choose one of these options. The next step is to understand all the options before deciding which.
