TYPES OF LIFE INSURANCE
There are different types of life insurance. The majority of life insurance policies are one of the following types:
- Term Life
- Whole Life
- Universal Life
- Variable Life
To determine which type would be best for you, it is time to learn about the different kinds, and the pros and cons of each.
1) TERM LIFE INSURANCE
Term life insurance is the most basic and low-cost choice for life insurance. You simply pay a particular amount for a specific number of years. Normally, you can obtain term life insurance for 10, 15, 25, or 30-year terms. Each plan will have a few main features to compare.
A. The simple terms.
Should you die while the policy is in force, whomever you designated as your beneficiary would receive the proceeds. However, if you come to the end of the term while living, you have completed that insurance policy and must purchase and begin paying another term of life insurance. Bear in mind that your premiums will increase along with your age. In other words, the older you get, the more your insurance premiums will cost.
B. Guaranteed Renewal Term Life.
On the other hand, you might inquire as to whether a term life insurance policy you are considering has guaranteed renewal, which means that near the end of the term, you can go ahead and extend the policy without having to get a medical examination in order to continue the policy. Although this feature may not be all that important while you are young, it is advisable to purchase term life insurance that has guaranteed renewal if you can find one that is affordable for you to ensure that your investment in the policy is protected (for example, since $100 per month for 12 months times 20 or 30 years is a lot of money to have invested, you will not want your investment to slip away too easily). With guaranteed renewal, even if you become critically ill, you can still renew your policy without having a new medical exam to qualify for new insurance. This is something to consider if you have a pre-existing medical condition and have a policy that did not require a medical examination.
C. Convertible Term Life.
Another aspect of term life insurance which is very important is policy convertibility. Many term life insurance policies allow you to convert the policy into a policy that has cash value, also without a physical examination. Having a cash value life insurance policy can come in handy if you should ever need to borrow money against the policy.
D. Return of Premium Term Life.
You might wish to choose a term life policy that pays you back if you do not die during the term of the policy. With this type of insurance, if you pay the entire life insurance term and survive, you can have returned to you, tax-free, all the money you paid in for the policy over the years. This can give you a nest egg with which to buy more insurance, set up an annuity, use for retirement or college for the children, and so on. Rates for return of premium policies will cost you about one and a half times what a regular term life insurance policy will. However, if you survive the term, all your money comes back to you; therefore, it is something to consider in terms of your insurance needs and also your future financial planning.
REASONS TO GET TERM LIFE INSURANCE
In the event that you are already stretching your dollars to the limit, term life insurance is the least expensive and the simplest form of insurance. In most cases, you can protect your family and their future without the need for a lot of complicated calculations or even a medical examination. Term life policies also offer a fair amount of flexibility. There are choices within the range of policies available which allow you to tailor the policy to your needs. These include the length of the term, convertibility, and return of premiums, as well as with or without medical examinations.