Types of Life Insurance
The types of life insurance you have available and the benefits they provide may seem overwhelming at first. Whether you're looking for a simple, affordable plan or a tax-advantaged solution to your retirement and estate-planning needs, you can find a form of protection that fits your price range. Compare quotes from a number of experienced agents to secure the maximum benefit at premiums you can afford.
Many people procrastinate about searching for plans. Work, family and recreational activities are usually more enjoyable than planning for your loved ones' security after your death. However, making a decision about which one of these types of life insurance meets your needs can relieve the stress of avoiding this difficult topic. Once you've purchased your plan, your beneficiaries are guaranteed benefits as long as you follow the terms of your contract.
Term Life Insurance
A term life insurance policy is the most basic of all the types of life insurance. Most people who purchase this sort of plan need coverage for a limited amount of time, usually from five to 30 years. If your beneficiaries need protection for a finite period, and you don't want to invest in more costly types of life insurance, this sort of contract may be the perfect choice for you.
At the end of the time you agreed upon, you may need to prove that you're still insurable before your provider will continue covering you. You may need to pass a medical examination or provide one or more types of proof that you're in good health. Ask an agent to clarify the company's conditions for renewal and whether you have the option to convert to one of the more permanent types of coverage in the future.
Like other types of life insurance, term plans pay your survivors a benefit after your death if you die before your contract expires. Unlike permanent types of insurance, terminable policies have no cash value and give you no returns on your premiums. The goal of terminable agreements is to give you the security of knowing that you've taken care of your loved ones' needs in the event of your death.
Whole Life Insurance
Types of life insurance that provide permanent, lifelong coverage include whole life and universal policies. Whole life plans provide guaranteed death benefits to your survivors throughout your lifetime. These programs also give you the option to increase your policy's cash value by participating in your insurer's investment plan.
This form of coverage includes living benefits to you and your family as well as a death benefit to your survivors, because you can borrow against your plan's cash value while you're still alive. After your death, your loved ones will receive the face value of your policy. They can use this money to maintain their standard of living, finance an education or pursue other goals.
Your death benefits will cover the costs of your funeral and the administration of your estate, as well as any medical bills or debts left unpaid. You may also roll over the value of your policy into the net worth of your estate to augment the inheritance you leave your children. Your family should not owe income taxes on the benefit they receive, although they may owe gift or inheritance taxes.
Universal Life insurance
Never ending types of coverage include universal plans. Like other permanent types of insurance, these contracts pay benefits to your survivors after your death and include a cash value component that builds over time. However, these arrangements offer adjustable types of payment schedules that allow you to pay your premiums using the dividends from your investments.
Depending on how your insurer's investments perform, you may earn enough dividends to cover your entire premium and have enough left over to add to your cash value. Variable policies are similar to universal types of life insurance in that they offer adjustable premiums and death benefits that can increase or decrease according to your needs. However, with a variable agreement, you have the freedom to choose which of your insurer's dividend-earning accounts you want to invest in.
Out of all the types of life insurance on the market, universal contracts may be the most complex. If researching the payment conditions and benefit adjustments of an insurer's plan leaves you with many questions, you're not alone. Talk with an experienced, reliable insurance professional about the details of these agreements.
Permanent types of life insurance can be an attractive addition to your retirement portfolio. Not only do they ensure the well-being of your beneficiaries after your death, they may also act as a tax-deferred reserve fund. Because these plans offer lifelong protection at fixed premiums, your rates generally won't increase when you're a senior citizen.
