Life Insurance

To some they do not purchase life insurance until something happens to them which to me are a tragedy in itself. And to some people life insurance is a must. But before you start looking to purchase a policy, you have to understand the types and factors associated with it. You have to understand what is temporary or term life and permanent. And under the permanent type of insurance there are other sub types of policies which may offer a better deal for you.

Term life Insurance: It provides life insurance coverage for a specific duration of time or specific number of years for a specified premium. This type of policy coverage does not accumulate cash value. It is commonly referred and considered pure insurance. It is pure insurance because the premium buys protection in the event of death and nothing more. Though it will not accumulate any cash value, it is 8 to 10 times cheaper than a permanent life insurance.

Permanent life Insurance: It is a type of life insurance that remains in force until the policy matures. This will be in force provided that he owner continue to pay their premium when due. If the owner fails to pay the premium when it is due, the policy expires or policies lapse. Permanent life insurance cannot be canceled by the insurer for any reason except for fraud in the application.  This type of insurance builds cash value that reduces the level of risk to the insurer over time.

There are three basic types of permanent insurance namely; universal life, whole life and what are called endowment.

A universal life insurance is another type of permanent life insurance that is based on cash value. Universal life is intended to provide insurance coverage with greater flexibility in terms of the premium payments and the potential for a higher internal rate of return. The flexibility of this policy allows you to change the amount of insurance as your needs for insurance change. Some of these changes require underwriting approval. The main benefits of a universal life are its flexibility, security and protection for love ones, tax-free death benefit and tax deferred account value growth.

A whole life insurance is a type of insurance whereby the insurance policy remains in force for the policyholders’ whole life. There are seven different types of whole life insurance namely; non-participating, participating, indeterminate premium, economic, limited pay, single premium, and interest sensitive. Whole life insurance is expensive. This type of insurance is like a force savings. You are not only paying for the insurance but for the investment portion of it.

Decades ago, endowment insurance is popular as a saving mechanism and considered to be a good buy. But in today’s world it is being replaced by universal life insurance. It is a type of life insurance where its face value is payable only if the insured survives to the end of the endowment period. Endowment life insurance is rarely use in the last 15 or so years.

Accidental Death Insurance: This is a type of life insurance that is covers exactly what it says. Simply put, it is designed to cover the insured when they die due to an accident.