Types Of Life Insurance Policies
All life insurance policies are either term, whole, or some combination of these two types of policies. However, there are many different forms that life insurance can take, even within these types.
Universal life insurance allows you to adjust the premium and policy amount to what you feel you need.
If you want control over the financial and investing aspects of your insurance policy, your best option would be a variable life insurance policy. This policy is similar to a universal policy in that it accrues cash value, but you can choose how this cash value is invested.
Description of a Term Life Insurance Policy
A term life policy provides insurance over a specific period of time, and expires after the coverage period ends. They come in different lengths, including 5, 10, and 20 years. After the policy expires, there is no accumulated cash value, and no benefits to be paid; death benefits are only paid if you die while the policy is active. Term insurance could be described as a policy that’s designed to expire before you do.
Although premiums on term life policies tend to be low, they increase significantly as you age. Because of this, a term life policy is usually purchased when you’re young, to cover a long term. While short term renewable policies are initially less expensive, the premiums begin to make them less reasonable after middle age.
Below is an example of premium costs on an annual renewable term insurance policy. The policy in the example has a $200,000 death benefit, and the annual premiums are by age. Remember that these are only examples, to help illustrate how rates can change with age.
Age 35: $300/year
$900 / year age 50
Age 65: $2,500/year
What’s a whole life insurance policy?
A whole life insurance policy remains in force until you either die or reach age 100, so long as you pay the premiums on time. Whole life is the most common type of life insurance sold. Whole life is also known as “ordinary life” or “permanent” insurance. The main characteristics of a whole life insurance policy are level premiums, level face amounts, guaranteed values, and a relatively high degree of safety. Whole life policies accrue cash value over the life of the policy; a policyholder can access this cash for emergencies, as a supplemental source of retirement income or for any other needs.
Whole life insurance includes both insurance and savings: whole life policies are often used in long-term financial planning. The level premiums of whole life policies also mean that the premium will never change. This gives you the peace of mind of always knowing how much your premium will be; it will not increase as you grow older.
There are different risks involved for companies which provide whole life insurance policies and those which offer auto policies, for example. With an auto policy the insurance company hopes the policyholder will be a safe driver and never be in an accident. On the other hand, when an insurance company issues a whole life policy it knows it will someday have to pay the claim.
In these days it has become very easy and convenient to compare and shop for policies from different companies through the net. You can be sure that you get the best deal out of the market rates, which will meet your needs. It is also very important to check up with the BBB and check how these different companies are rated. You must have a careful eye for the financial standing of the insurance companies you are about to sign up for the policies. When you get thorough of all the information you need, you can compare and select the best whole life insurance policy online.
Graham McKenzie is the content syndication coordinator a leading South African Life Insurance and Life Cover portal.
