Types of Life Insurance – Which Type of Life Insurance is Best For You?
Life insurance is an agreement between an insurer and an insurance holder, in which the insurer promises to cover a designated insured person a fixed amount of money upon the insured person’s death. Depending on the contract, redundancy or other similar events may also cause payment to be made. This contract was originally created to ensure that families were able to pay off their debts in the case of the insured individual’s death. With many changes over time, Life insurance has become one of the most misunderstood types of insurance. Many consumers don’t understand what this type of insurance actually is or what it covers.
A term life insurance policy type is usually inexpensive and flexible. It will pay out a set amount of cash upon your death, depending on several factors such as age and whether or not you’ve had any insurance within the last few years. For some people this can be an ideal option. If you’re young and healthy, then this may be the best option for you. However, because this type of policy can only last for so long, you must be sure that you’ll be able to make the payments at the end of your contract. While term life insurance policies are flexible and cost effective, they are not without risks.
Another type of Life Insurance is permanent life insurance. This is usually more expensive than term insurance but you can extend your coverage if you should pass away. This may be the better option if you have a family who depend on you or if your finances are tight. The premiums are higher but the benefits will be much more substantial should your loved one ever need life insurance.
As a general rule, whole life insurance policies have a set pay scale for their beneficiaries, but they also offer the choice of having a variable or increasing your beneficiary’s pay scale as you get older. In addition to your premium payments, you can also choose to have your beneficiaries receive payments out of your estate, which can be tax-free. If you should pass away unexpectedly, your beneficiaries will still get most of the money that you’ve paid into your policy, regardless of when you pass away.
There are advantages and disadvantages to both permanent policies and whole life insurance policies, especially depending on what type of plan you’re looking for. A permanent life insurance policy is often required before you can borrow money against it. A whole life policy can give you a lump sum amount of cash when you die, but it will also require you to wait a set amount of time before your beneficiaries can access it. Finally, a permanent policy can last for your entire lifetime; however, it will also cost more because it will have a fixed premium payment and no additional payments can be made.
Since there are different types of Life Insurance policies available, it’s important that you understand the difference between them before you purchase one. You should learn about the difference between Universal Life Policies (which pays out to your beneficiaries) and Variable Universal Life Policies (which pays out a set amount for you, depending on how much you earn and save). You should also learn about the difference between a Term Life Insurance Policy (which pays a regular monthly payment until your death benefit is depleted) and a whole life or universal policy (which guarantees a payout even when you die, regardless of your age). It’s also a good idea to talk to a qualified insurance professional so that you fully understand how to purchase the right type of policy for your financial support.