How to Compare Low Cost Life Insurance Quotes
Life insurance is actually a contract between an insurer and an insurance holder, in which the insurer pledges to pay out a designated amount of money to an insured person, upon the insured person’s death. Depending on the contract, certain events like critical illness or terminal illness may also trigger premium payments. In general, all policies are permanent in nature and there are generally no age limits for coverage. Also, some life insurance plans offer the option to borrow against the value of the plan, which has a limit on the amount that can be borrowed.
The most common types of life insurance are term and renewable term premium. With term policies, the death benefit is paid out over the life of the policy. With renewable term premium life insurance policies, premiums are paid annually, semi-annually, quarterly, and monthly. These premiums are variable and are based on the age at which the policy was purchased.
A nonqualified life insurance policy pays a specified amount to named beneficiaries, regardless of the policy owner’s or beneficiary’s age. With these types of policies, there is no legal protection for named survivors and dependents. The insured does not have an option to borrow against the policy and there is no guarantee that the beneficiary will receive a lump sum. If the insured passes away due to natural causes, the payout from the policy owner’s insurance provider is limited to only the stated benefits.
Variable universal life (VUL) and whole life insurance companies offer policies that pay out death benefits, either as a lump sum or over a period of time. With these policies, the insured has the option to borrow against the policy and the amounts that are paid out are subject to change. Also, the cash value of these policies is more volatile and prone to extreme gains and losses. As a result, the policy owner must rely on information provided by actuaries more than the options provided by variable universal life insurance companies offer.
Permanent life insurance allows the policy owner to make changes to the coverage without making a lump sum payment or changing the premiums. Policies can be tailored to suit the needs of the policy owner, as well as his or her family. Some permanent life insurance policies may include an additional feature that provides coverage for a beneficiary if the policy owner is disabled. Premiums for these policies may be higher than other permanent life insurance policies, but they are usually guaranteed renewable. While these premiums are relatively higher than those on variable life policies, they may be well worth it if a person needs coverage for a long time.
The choice between permanent and term insurance should be made based on the specific needs of a person and his or her family. Term insurance is often used when a person is younger and less likely to outlive the policy, while a larger sum assured for a shorter period is better suited for older people who are more likely to experience a larger amount of longevity. The amount of coverage provided by permanent life policies is based on a number of factors, such as the amount expected to be paid out on a death, how likely it is that the insured person will live past the expected age of death, and how much money is in the policy’s cash value. It is possible that the total amount of the premiums paid over the lifetime of the policy may be greater than the actual value of the premium paid. This is called an infinite benefit risk.