|
Life Insurance Policies – Will You Choose the Right
One?
Life Insurance. What does this mean
to you?
For some it means security, knowing
that their family or business is safe should they unexpectedly
pass away. For others it conjures up images of pushy
salesmen and confusion about what they are buying.
By learning about the different life
insurance policies available you can make an informed
decision that will give you peace of mind and satisfaction
with your responsible decision.
There are three main types of policies.
Here is a brief explanation of what they mean:
Whole Life
Whole life insurance is a permanent
insurance. This means that the policy stays in effect
for your ‘whole life’ as long as premiums
(payments) are up to date.
The cost of whole life insurance premiums
will usually be more than the cost of an equivalent
amount of term insurance because the cost is averaged.
While the cost of term insurance goes up with each renewal,
whole life insurance never needs renewing. Instead of
paying smaller premiums when you’re young and high
premiums as you age, whole life premiums stay the same.
In some policies a savings option can
be added which can be used to borrow against.
Universal Life
Universal life insurance is another
form of permanent insurance. Like whole life the policy
is in effect until you die. You never need to renew
the policy (regardless of health) and the premiums will
never go up.
Universal life also incorporates other
financial services including a savings plan that can
be made in addition to the policy. Otherwise the policy
can be surrendered in exchange for the savings that
have accumulated. Policy owners can often choose from
many options including adding another person to the
policy, managing their own investments or using the
savings to cover the costs of premiums.
Universal life insurance is the most
expensive option because of the amount of flexibility
and options.
Term
Term insurance is the least expensive
life insurance policy option. Term insurance is selected
for a certain period of time (term) such as; 1 year,
5 years, 10 years or 20 years.
Term insurance is a good choice for
young families with dependants and high debts (such
as a mortgage) that they will be no longer be responsible
for in 15 to 20 years when the policy ends. Term insurance
has no cash value – it cannot be borrowed against
or cashed in. If the policy ends and the individual
wants to renew the policy the cost of premiums will
be higher.
Using term insurance to cover the basic
financial requirements of an individual while also instituting
a separate savings plan may reduce the need for insurance
later in life.
Policy Riders
Depending on the needs of an individual
there are other options that can be purchased with certain
insurance policies.
The additions to the life insurance
policy are called ‘riders’. This includes
adding a spouse, including disability income insurance,
Accident and Sickness (A&S), Accidental Death and
Dismemberment (AD&D) as well as customized choices
for taking loans or cash payouts on certain policies.
Talk to an insurance broker who will
explain the benefits of each feature and recommends
only what best suits your needs. With a bit of understanding
you can make the most responsible choice with your money
and be confident your family or business is provided
for.
1howto.com
--------------------------------------------------
Please
Share Your Tips with Us
|
