The General Types of Life Insurance
Life insurance is important and everybody knows that. We can never always predict what can happen to us or to our loved ones when we are no longer around. Because of this, it is wise to know the different kinds of low cost life insurance policies being offered in the market nowadays.
The general types of life insurance which will be discussed below include term life insurance, traditional whole life insurance, universal life insurance, variable life insurance, variable universal life insurance and joint or survivor life insurance.
a. Term Life Insurance. This refers to insurance that guarantees death benefits for a specific period of time. This means to say that your beneficiary will receive the death benefits should you die within the coverage period. But, if it happened that you are still alive after the term period of the insurance, your beneficiaries won't get anything. This type of insurance typically ranges from 1 to 30 years.
b. Traditional whole life insurance. Traditional whole life insurance, unlike term life insurance, extends coverage for your whole life. This type of insurance is typically more expensive because of the premiums added to regular payments. These extra amounts are credited to an account called cash value. This account which will be invested by the low cost life insurance company enables the company to ask for steady and assured premium and for them to be able to offer cash value and death benefit over the entire life of a policy.
It is essential to take note that policies applied to this life insurance type is very strict such that partial surrender can reduce benefits and total surrender will abort the insurance coverage. But, if you are still alive after the maturity date of the insurance policy, the insurance company will pay you the cash value that had accumulated.
c. Universal life insurance. This type of low cost life insurance offers flexibility and openness to those who will opt for it. It is like the traditional life insurance with death benefit and cash value but allows freedom in how you make premium payments.
These premium payments are guided by broad guidelines wherein you can get to choose when and how much you can pay your premiums. Aside from this, you have the freedom of changing, within the insurance policy's terms, the death benefits. It is important to take note, however, that minimizing or increasing the payments you make for your premiums will affect the maturity of the cash value account and the death benefit. And, increasing the coverage amount can lead you to undergo the whole insurability process again including a medical examination and an increase in premium payments.
But what is good with universal life insurance is that, everything about the policy is open such as the cost of insurance, expenses and the cost structure of the policy. And in addition to the changes that you can do with this life insurance policy above, it also provides options for you to add the cash value amount to the life insurance's face amount.
d. Variable life insurance. Variable life insurance is like the traditional life insurance and the universal life insurance that has, aside from death benefit, a cash value. The annual premium in this type of insurance is fixed and it usually guarantees a death benefit that is minimum.
However, in this type of insurance policy, you as the policy holder, can get to decide how your cash value account will be invested. These investments, called sub accounts are varied ranging from fixed interest to ever-changing interests. If the cash value goes beyond a specific amount, you are guaranteed that you will have an increase in the death benefit.
e. Valuable Universal Life. This type of low cost life insurance is the ultimate in flexibility. It allows you to do the following within some broad guidelines:
• decide how much you pay for your premiums
• decide when you pay your premiums
• decide where your cash value account will be invested in any of the different subaccounts.
It is important for you to keep in mind that each decision you give for each of these options will directly affect your policy's face value and your death benefits. Aside from this, low interest loans you withdraw are taken against your life insurance policy's cash value which are taxable and could lessen the face amount of your insurance.
f. Joint or Survivorship Life Insurance. This life insurance are taken up by married couples and is available in any permanent life insurance type. There are 2 types of such life insurance. These are the "joint first-to-die" and the "joint second-to-die". With the former, the death benefit is given to the husband or wife of the dead spouse while on the latter, the death benefit is paid only when both husband and wife have died.
Married couples often choose "joint second-to-die" policies for their estate planning to be able to pay their taxes for their holdings and other outstanding expenses on the second spouse's death.
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