| Home | About Us | Contact | Privacy Policy | Sitemap | Articles | Save This Site |
|
You are probably already aware how important it is to purchase life insurance to protect yourself and your loved ones. However, you may not realize how many different life insurance coverage options are available.
Investment & Protection Policies Basically, the two main types of life insurance consist of investment policies and protection policies. Investment policies are used to accelerate the accumulation of capital by paying premiums. Protection policies with cash benefits provide coverage after certain events such as a death. Normally, the payment is made in one lump sum. Three Basic life insurance Parties life insurance policies include three main parties: the insurance provider, the insured and the policy holder. In many cases, the insured and the policy holder will be the same individual. However, one person may purchase a life insurance policy for his/her spouse, making the purchaser the policy holder and the spouse the insured. Policy holders need to pay premiums to the insurer in order to maintain insurance coverage. If the insured ends up dying, the beneficiary of any life insurance policies will receive the proceeds of the policy. Policy holders can specify who they wish to designate as the beneficiary. Most life insurance policies also allow policy holders to change the beneficiary throughout the policy’s term. Two Basic Classes of life insurance life insurance falls under one of two basic classes: permanent and temporary. Within these classes are various subclasses such as variable, endowment life insurance, variable universal, whole life, universal and term life insurance. Temporary life insurance: Temporary life insurance, also known as term life insurance, covers a policy holder for a designated period of time for a specific premium. Therefore, the goal of this policy is protection only; you will not be able to accumulate any cash value with a protection policy. The sole purpose of term life insurance is to purchase protection for the death of the insured. Because the risk of death within a specified term is lower, the premiums for this type of insurance are normally less. Permanent life insurance: Permanent life insurance remains valid until it is canceled because a policy holder has failed to make the necessary payments or once the benefits have been paid out after the insured has died. Unlike temporary life insurance, permanent life insurance enables you to build cash value; this will lower the risk to your insurance provider with time. Whole life insurance: The three main types of permanent life insurance are whole life, universal life and endowment insurance. If you purchase whole life insurance, you will need to pay a set premium for the life of the contract, and you will be guaranteed a certain cash value. One advantage of this type of insurance is the fact that cash values, expense and mortality charges, annual premiums and death benefits will not lower your policy’s cash value. The main disadvantage to whole life insurance is the inflexible nature of the policy and the lower rate of return compared to other methods of saving. Universal life insurance: This type of insurance is newer than the other types, and it offers full permanent coverage. Another advantage is the higher rate of return and the flexibility concerning premiums. Many policy holders choose to purchase universal life insurance because this type of policy enables them to build a cash account which grows with the premiums. Endowment life insurance: With an endowment life insurance policy, you can build up cash value. This will equal the death benefit at a specific age referred to as the “endowment age.” Because the endowment date is earlier and the premium period is shorter, endowment policies normally cost more than other types of life insurance coverage. Obviously, the above information is merely a general overview of the types of life insurance policies—there are many more types available. We recommend talking to your insurance agent, visiting your local insurance company or conducting an online search for affordable and reliable insurance providers. You’re sure to find a life insurance policy that meets your needs. |
|
|
