By Lois Kellam
Most individuals understand the need for having a life insurance policy. However, choosing from the several kinds of policies can lead to confusion. While features and names vary among policies, it generally falls into three general categories, but differ in options and cost. Your policy should match you and your family's life situation. You can purchase a variety of life insurance contracts. Many policies offer cash value savings along with a death benefit, while others offer just a death benefit. Its basic function is to provide payment to the survivors of the person who dies at the time of the death to cover the cost of funeral, outstanding debts and the care and maintenance of family members who were depending on the person who died for support.
Universal insurance policy is similar to whole life in that you are covered throughout your lifetime, as long as you pay the premiums. A portion of your premium is invested by your insurance company, often in mortgages or bonds. After your death, your family receives the value of the policy or the value and cash value of the investment. In connection with the value of the investment account, your policy may decrease or increase.
Term insurance policy is usually the least complicated and expensive type of policy to purchase. You can buy coverage for only a specific amount of time, and if you die during this time, your family receives the value of your policy. This kind expires if you outlive the policy terms. There are two types of term life insurance: level term and decreasing term. Level term means that the value of the policy stays the same throughout the policy. Decreasing term is when the value decreases as you age. According to Bankrate.com, most experts recommend term life insurance policies to most individuals because of its value and simplicity.
Whole insurance policy provides permanent coverage for your family while building a cash value account. With this sort of insurance, the insurer manages and invests the policies cash value accounts. It offers a set rate which can't rise during your lifetime as long as you continue to pay the planned amount. Another type is Variable life insurance which provides permanent protection for you and gives flexibility on your investment account. This is appropriate for the more risk-oriented policy holder. It lets the death benefit to adjust in relation to the fund returns of the cash value account.
Endowment policy, this is the most popular type of policy. With endowment policy, the family of the policyholder will get the insured amount on the event of death of the policy holder within the policy term. However, if the policy holder is alive after the policy term, then the insurance company offers the insured amount plus some investment benefits such as double endowment, marriage, education endowment plans, etc to the policy holder.
Life insurance is essential in order to protect your loved ones. Aside from protection, it can also offer an investment vehicle as a form of saving up for your family. It's never too early or too late for anyone to acquire a life insurance. As you reap the benefits, you will see that it will be worth every dime you have invested.
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