Life Insurance

When Individuals make the decision to purchase life insurance, they are often in the process of experiencing a major life-altering event such as getting married, starting a family, or purchasing a home. In fact, there are many good reasons for purchasing a life insurance policy. And most of us, at some point in our lives, will realize that owning life insurance is very important to ensure our sense of security.

Can you even imagine the anxiety of driving on the freeway without auto insurance? All of us know that at some point an accident is almost inevitable. But if you are insured, your car will be repaired, and your medical bills will get paid. Life Insurance works the same way. It ensures that your family will not suffer the consequences of living without your earnings.

People have suffered deep feelings of remorse and regret when they became ill and realized their loved ones were not going to be financially protected after their premature death.

Most people really do not want others to be held responsible to pay off any outstanding debts that were incurred during their lifetimes. A life insurance policy makes good sense because the proceeds can pay the money owed, such as credit card debt, leaving your loved ones in a better financial position.

There are three main types of Life Insurance available and choosing the right one can be a confusing task. You need to decide which type of coverage best fits your needs.

Term Life Insurance

This is probably the most common form of Life Insurance, and is also the easiest to understand. You purchase a policy for a set period, and at a set premium. For example you may decide to purchase a ten year policy to cover yourself until your children finish college. If you die during the course of the policy, then your named beneficiary will receive the value of the policy as a lump sum. Once the policy has expired you will receive no payment of any kind, even if you die shortly afterwards. This policy carries no cash account unlike the rest of the policies we will look at.

Whole Life Insurance

This policy covers you for your whole life and is not for a specified time period. The premiums are normally fixed throughout for as long as you continue to pay the agreed amount. There is also the option to receive dividends from your policy as cash payments. Alternatively you can use these dividends to reduce future premium payments. These polices offer no flexibility to invest in separate funds, or to have separate accounts. There is also no option of changing your premium payments.

Universal Life Insurance

These policies have greater account flexibility than Whole Life, but carry more of a risk from an investment standpoint. It is possible to earn interest at market rates for the cash account. As the policyholder you can, depending on your policy agreement, choose to change your premium payments, miss payments or pay in a lump sum amount.