Life Insurance
Different Types of Life Insurance: Which One is Right For You?
Life insurance is a great way to protect your family financially should anything ever happen to you. You may want to consider getting a life insurance policy if you are married, have children, or other people depend on your income for support.
There are a number of different types of life insurance policies available, and finding which one is the best for you and your family can be a challenge. Here are some of the different types of life insurance policies out there.
Term Life Insurance
Term life insurance is perhaps the simplest and cheapest type of life insurance available. This type of life insurance is considered temporary and provides protection for a certain period of time, usually 1-30 years. If the insured dies before the end of the term, his beneficiary receives the face value of the policy. If he does not die by the end of the term, he does not receive anything. At the end of the term life insurance period, you can choose to extend your policy or convert it in to a permanent life insurance policy. If you choose to renew, your life insurance premium will most likely go up. Most people argue that term life insurance gives you the most value for your money. You can compare free term life insurance quotes at ELifeInsuranceSaver.com
Whole Life Insurance
Whole life insurance, also called permanent life insurance, is basically term life insurance with an investment component that allows your policy to build cash value that you can borrow against. The investment could be in stocks, bonds, money markets, etc. Whole life insurance is very expensive because of the investment commissions and fees you are charged, and there is no guarantee that your investment will even make any money. As with term life insurance, your premium will be the same over the life of the policy. Three common types of whole life insurance policies are universal life, variable life, and traditional.
Universal Life Insurance
Universal life insurance is a form of permanent life insurance policy that combines a term life insurance policy with a tax deferred interest accumulating savings account. People that feel they need life insurance into their 70s and 80s would benefit from this policy because it allows adequate time for substantial savings growth. It takes a while for this type of policy to build considerable value, and you might not be able to save much in a shorter amount of time. If you feel that you do not need life insurance for that long, you should consider getting a term life insurance policy and finding another way to save for retirement and the future.
There are lots of different life insurance options out there. This is a very important decision for you and your family, so take your time. You can compare free life insurance quotes from various companies for different types of policies to see which one is best for you. The more research you do, the more knowledgeable you will be, and the better chance you will have at finding the perfect life insurance policy.
6 Reasons to Buy Whole Life Insurance or Term Life Insurance
quality term or whole life insurance coverage is important, especially if there are people in your life whose financial stability depends on your income. Many financial experts even consider life insurance to be the foundation of sound financial planning. Find out six reasons why you should purchase whole life insurance or term life insurance to protect your family and loved ones.
1. Income for Dependents
If people in your life depend on your income for financial support, having a whole life insurance or term life insurance policy in place will protect them in the event of your death. Life insurance can replace your income for your dependents so they aren’t left bearing the financial burden of an income lost through death. This applies most often to parents with young children, but is also applicable to couples if the death of one partner would leave the survivor financially stricken. If your parents, adult children, or siblings are your dependents, life insurance can also provide replacement income to benefit them. And, if your surviving spouse or domestic partner’s government or employer-sponsored benefits will see a reduction after your death, having life insurance to replace your income can definitely be useful.
2. Coverage for Final Expenses
Funeral and burial costs can be expensive, but your life insurance can cover the costs. Carefully planned life insurance will also provide funds to cover mortgages and other expenses. Debts and medical expenses not covered by health insurance can also be covered by your life insurance. Life insurance offers protection to the dependents you leave behind, since it can sometimes be utilized as a cash resource.
3. Create Inheritance
Life insurance can allow you to create an inheritance for your immediate relatives or heirs. Even if you don’t have any other significant assets to pass onto your surviving family or loved ones, you can create an inheritance by naming your heirs as beneficiaries in your life insurance policy.
4. Pay Estate Taxes
Rather than leaving your surviving family to take a smaller inheritance or do away with some assets, have a quality life insurance policy in place so the benefits can pay estate taxes. Some life insurance plans provide tax free cash that can be used to pay estate taxes and death duties.
5. Create Source of Savings
Your life insurance can become a sort of savings plan since some types of insurance can create a cash value that is available for withdrawal upon the owner’s request. Another benefit of this “forced” savings plan is that the interest credited is tax deferred, and if the money is paid as a death claim, the interest can be tax exempt (www.iii.org).
6. Make Charitable Contribution
By naming a charity as a beneficiary of your life insurance, you can make a larger contribution than if you donated the cash equivalent of your policy’s premiums. Donating a term life insurance policy allows you to deduct the cost of the premiums from your taxes. And, if you donate a whole life policy, you can deduct the cash value of the policy and the cost of the whole life insurance premiums. In both cases, after you die, the charity you select gets the insurance policy proceeds.
Plan ahead and ensure that you have a quality life insurance plan in place to protect your family.
How To Select The Right Type Of Life Insurance
Life insurance is a means for providing financial protection for your family in the event of your death. A life insurance contract is relatively straightforward; you agree to pay a premium at regular intervals, and the insurance company agrees to pay a certain sum of money to your beneficiary upon your death.
There are three parties to a life insurance contract. First, there is the insured. This is the person whose life is being insured under the policy. Next, there is the insurer. The insurer is the insurance company who underwrites the risk. And third, there is the owner. The owner and insured are not necessarily one and the same. Someone can buy a life insurance policy to insure the life of someone else, such as their spouse.
The person who buys the policy is the owner, and the person whose life the policy is based on is the insured. When the owner and the insured are different people, premium payments are the responsibility of the owner.
Every life insurance contract also has a beneficiary. This is the person who receives the proceeds from the policy in the event of the death of the insured, and is assigned by the owner. There are two types. An irrevocable beneficiary can not be changed unless the beneficiary gives his or her permission; if it is revocable, the owner can change it at any time.
The policy is subject to certain terms and conditions. There are usually certain exclusions that apply, depending on the person being insured. But with almost every policy, death as the result of suicide during the first two years of the policy term is excluded from coverage.
Also, during the first two years of the policy, often referred to as the contestable period, the insurance company retains the right to not immediately pay out, even if the death is caused by a condition that is covered in the policy. The company can order an investigation into the death of the insured, to make sure that the death was not deliberate or the result of homicide.
The amount paid to the beneficiary is called the face amount. The maturity date is reached upon either the date when the insured deceases or reaches a certain age. Life insurance is most often used to provide income protection to the spouse of the deceased.
Regardless of the reason for buying the insurance, the owner (if not the same person as the insured), must have an insurable interest. In other words, the owner of the contract must have a reason for wanting to insure the life of that person, otherwise the contract is void.
When the person covered by the policy dies, the insurance company requires proof of death before paying the claim. A notarized death certificate is the most commonly accepted form of proof. The benefit is paid out either as a lump sum or as an annuity that is paid out over time.
Any annuity can be a good way to receive the benefits. It is possible for the beneficiary to set up a lifetime annuity, which would guarantee that person a certain amount of monthly income for the rest of his or her life.
There are two basic types of life insurance, temporary and permanent. Temporary insurance is known as term life. An example of a term policy would be a 20-year term life, which means that the policy will pay a death benefit if the person dies within the next twenty years.
Permanent insurance includes whole life and universal life. Whole life provides for a payout no matter when the person dies, but premiums have to continue to be paid, usually right up until the insured reaches the age of 100. Universal policies are somewhat similar, but they allow for greater premium flexibility. Universal insurance is somewhat complicated; you should talk to an agent before buying it.
I hope this information has helped you become acquainted with life insurance. You should sit down with your spouse and talk about buying a policy. Then, call an agent who works for an insurance company with a strong financial rating and make an appointment to discuss your objectives. Use the information that was presented here to help you make intelligent choices so your family will be protected in the event that something happens to you.