What Is Life Insurance? - An Insurance Primer
By Neil Jesani
In order to answer the question, "What is life insurance?" you'll first want to learn as much as you can about the various types available. At its core, a life policy is a contract between you and the insurance company to pay a benefit to the person you name as your beneficiary in the event of your passing. But there are many types of life coverage, and choosing the right one will take a bit of study and the guidance of a qualified professional. Comparing the similarities and differences of the different policy types and consulting with a broker will help arm you for the crucial decision of which type of policy to get.
Life insurance is a necessity even if you have, so far,
neglected to invest in it. In fact, the average person waits for some
life changing milestone before looking into it. Getting married, having a
child, or even witnessing the death of a loved one are all events that
typically inspire someone to purchase a life policy for themselves.
Unfortunately, the different aspects of insurance are not commonly
taught in school or found in a book. That means when the time comes to
purchase life insurance, people may be confused about their options.
This is understandable.
Let's clear up some of the uncertainty about life insurance by taking a look at the different types available. This will provide you with the basic understanding about the different life policies, helping you to make the choice about which one is right for you.
Term Life: A term life insurance policy is the type of insurance that is closest to car insurance. It has no value unless you use it, just since your car insurance has no value unless you have an accident. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death, and nothing else.
Whole Life: In most cases, whole life insurance provides lifetime death benefit coverage for a level premium. Premiums are a bit higher than term insurance when the policyholder is younger. But when you consider that term insurance premiums rise with age, the cumulative value of all premiums paid across a life time are pretty much equal between whole life and term life. Part of the whole life insurance contract states that the policyholder is entitled to a cash value reserve, and it's guaranteed by the company.
Universal Life: Universal life insurance combines permanent insurance coverage with flexibility in your premium payment. A universal life insurance policy includes a cash value, so that means it also offers the potential for greater growth of cash values. The premiums you pay into the policy combined with the interest accrued increase the cash value, however the cost of insurance reduces your cash value. The surrender value of the policy is the amount payable to the policy owner after applicable surrender charges, if any.
Limited-pay: Another type of coverage is Limited-pay life insurance. With this plan, all the premiums are paid over a specified period. After that, no additional premiums are due in order to keep the policy in force. Common limited pay periods include 10-year, 20-year, and are paid out at the age of 65.
Accidental Death: This is a limited life insurance policy designed to cover the insured should they pass away due to an accident. Accidents include a wide range of injuries and incidents, but the policy does not typically cover deaths resulting from health problems or suicide. Accidental death policies very rarely pay a benefit. This is because the cause of death often is not covered by the policy, or the coverage is not maintained after the accident until death occurs. If you have this type of policy, it's a good idea to be very clear about what it covers and what it excludes.
Endowments and annuities are a little more complex types of insurance that can offer investment and tax shelter features. You may want to discuss their benefits and complexities with your agent or broker.
Life insurance is less expensive to acquire during the earlier stages of life, when the risk of death is relatively low. Whether you're considering a term life policy, whole life, or something more tailored, life insurance is an essential part of your financial management plan to secure the future of your family.
Let's clear up some of the uncertainty about life insurance by taking a look at the different types available. This will provide you with the basic understanding about the different life policies, helping you to make the choice about which one is right for you.
Term Life: A term life insurance policy is the type of insurance that is closest to car insurance. It has no value unless you use it, just since your car insurance has no value unless you have an accident. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death, and nothing else.
Whole Life: In most cases, whole life insurance provides lifetime death benefit coverage for a level premium. Premiums are a bit higher than term insurance when the policyholder is younger. But when you consider that term insurance premiums rise with age, the cumulative value of all premiums paid across a life time are pretty much equal between whole life and term life. Part of the whole life insurance contract states that the policyholder is entitled to a cash value reserve, and it's guaranteed by the company.
Universal Life: Universal life insurance combines permanent insurance coverage with flexibility in your premium payment. A universal life insurance policy includes a cash value, so that means it also offers the potential for greater growth of cash values. The premiums you pay into the policy combined with the interest accrued increase the cash value, however the cost of insurance reduces your cash value. The surrender value of the policy is the amount payable to the policy owner after applicable surrender charges, if any.
Limited-pay: Another type of coverage is Limited-pay life insurance. With this plan, all the premiums are paid over a specified period. After that, no additional premiums are due in order to keep the policy in force. Common limited pay periods include 10-year, 20-year, and are paid out at the age of 65.
Accidental Death: This is a limited life insurance policy designed to cover the insured should they pass away due to an accident. Accidents include a wide range of injuries and incidents, but the policy does not typically cover deaths resulting from health problems or suicide. Accidental death policies very rarely pay a benefit. This is because the cause of death often is not covered by the policy, or the coverage is not maintained after the accident until death occurs. If you have this type of policy, it's a good idea to be very clear about what it covers and what it excludes.
Endowments and annuities are a little more complex types of insurance that can offer investment and tax shelter features. You may want to discuss their benefits and complexities with your agent or broker.
Life insurance is less expensive to acquire during the earlier stages of life, when the risk of death is relatively low. Whether you're considering a term life policy, whole life, or something more tailored, life insurance is an essential part of your financial management plan to secure the future of your family.
Next, you'll want to talk with a qualified life insurance
specialist and make sure your coverage is in line with your specific
level of need. Even if you currently have a life insurance policy, you
may actually be under-insured, leaving a financial gap for your loved
ones. Find out how you can optimize your life insurance coverage and
save money at the same time. Go to
[http://www.beamamoney.net/what-is-life-insurance] for more information
or even to request a quote. We can answer all of your questions for you
and help you secure your financial future. BeamaMoney. We've got you
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What Are the Different Types of Life Insurance Policies?
By Steve D Wright
Life insurance is something that everybody will need at some
point but unless you work in the insurance industry or are close to
somebody that does, what do you actually know about the types of life
insurance policies that are available to you? The answer to that
question is more than likely 'not a lot', and why should you? Insurance
is not something that is explained in school or college and in most
cases where the need for it comes up it is due to a mandatory
requirement, such as if you wish to start driving car. Life insurance on
the other hand can often be something that is more optional than
mandatory.
You can be forgiven for thinking that there is a generic life policy for insurance that everybody buys but this is really not the case and there are various different types of life insurance that can be purchased, each having it's own specific features and benefits that may be of interest to consumers. We are now going to give a brief explanation as to what these different kinds of life insurance are so that you can recognize the difference between them.
Term life insurance - Term life is what is known as a temporary insurance policy or short term life insurance, because it only runs over a set amount of time that in the grand scheme of things is seen as the short term. You will pay a periodic premium to ensure that if you are to die or become seriously ill in the time that the policy is in force you, or your estate/surviving partner, will be paid out a pre-determined sum of money known as the sum assured/death benefit. Term life insurance is generally a non-profit type of life insurance and that means that you are not investing the money you pay as premiums, you are simply paying for the assurance that while the policy is in force it will pay out in the event of death or serious illness as highlighted in the contract. These types of insurance are commonly taken out as assurance to cover a short term loan such as a mortgage and they can also be convertible or renewable come the end of the term.
Whole of life insurance - Whole of life policies are long term insurance contracts and as the title suggests run for the life of the plan holder and not just a set term as with term life policies. There are many variations to this type of life policy. The policy will pay out a pre-determined sum of money on the death or serious illness of the life assured and it also has a cash value as the premium is split to cover the insurance and as an investment. Premiums are pain of a periodic basis, i.e monthly, quarterly or annually for the life of the policy unless the plan holder wishes to cease paying premiums and keep the policy simply as an investment, if this happens the sum assured will drop as a result and the cash value will only grow in relation to the fund that it is invested in as no further premiums are being paid into the plan. These policies are usually found to be more expensive and are beneficial for the same reasons as term life but also those that want to use the savings element and cash advantages that these types of life insurance policies have. Universal life is also one of the most popular types of permanent insurance polices for life plans.
Which of the types of life insurance policies are applicable to you depends upon your individual circumstances and should be discussed with an insurance agent or professional who can help guide you to not only getting the best value for your money but also ensuring the contract that you buy fits you and your family's financial requirements in both the short and long term.
You can be forgiven for thinking that there is a generic life policy for insurance that everybody buys but this is really not the case and there are various different types of life insurance that can be purchased, each having it's own specific features and benefits that may be of interest to consumers. We are now going to give a brief explanation as to what these different kinds of life insurance are so that you can recognize the difference between them.
Term life insurance - Term life is what is known as a temporary insurance policy or short term life insurance, because it only runs over a set amount of time that in the grand scheme of things is seen as the short term. You will pay a periodic premium to ensure that if you are to die or become seriously ill in the time that the policy is in force you, or your estate/surviving partner, will be paid out a pre-determined sum of money known as the sum assured/death benefit. Term life insurance is generally a non-profit type of life insurance and that means that you are not investing the money you pay as premiums, you are simply paying for the assurance that while the policy is in force it will pay out in the event of death or serious illness as highlighted in the contract. These types of insurance are commonly taken out as assurance to cover a short term loan such as a mortgage and they can also be convertible or renewable come the end of the term.
Whole of life insurance - Whole of life policies are long term insurance contracts and as the title suggests run for the life of the plan holder and not just a set term as with term life policies. There are many variations to this type of life policy. The policy will pay out a pre-determined sum of money on the death or serious illness of the life assured and it also has a cash value as the premium is split to cover the insurance and as an investment. Premiums are pain of a periodic basis, i.e monthly, quarterly or annually for the life of the policy unless the plan holder wishes to cease paying premiums and keep the policy simply as an investment, if this happens the sum assured will drop as a result and the cash value will only grow in relation to the fund that it is invested in as no further premiums are being paid into the plan. These policies are usually found to be more expensive and are beneficial for the same reasons as term life but also those that want to use the savings element and cash advantages that these types of life insurance policies have. Universal life is also one of the most popular types of permanent insurance polices for life plans.
Which of the types of life insurance policies are applicable to you depends upon your individual circumstances and should be discussed with an insurance agent or professional who can help guide you to not only getting the best value for your money but also ensuring the contract that you buy fits you and your family's financial requirements in both the short and long term.
Steven D Wright worked for many years in the offices of one of
the UK's largest insurance companies. His websites on Types of Life
Insurance
[http://www.types-insurance-policies.com/types-life-insurance-policies.php]
and types insurance policies [http://www.types-insurance-policies.com]
explain in straight forward language the intricacies of the insurance
world.
Article Source:
http://EzineArticles.com/expert/Steve_D_Wright/828893