Types Of Life Insurance
There are various types of life insurance available to meet different needs of individuals and families. Most people have difficulties in understanding the kind of protective cover offered by each policy. It is thus best to discuss your options with an agent to make sure you understand which particular life policy is best suited to meet your needs. You should take into account various factors before purchasing a life insurance policy. These among others include factors such as age, marital status, number and ages of children, medical history, earning capability, debt ratio, anticipated financial needs and the number of beneficiaries.
Types Of Life Insurance
Term Life Insurance
Term life insurance is the simplest form of life insurance that covers a specific period of your life for a specific price. If you die during that time period your beneficiary will receive the value of the policy. There is no investment component in term life insurance.
Whole Life Insurance
Whole life insurance policy covers your entire life instead of a specific period only. Premiums remain uniform throughout the life of the policy and the insurance company invests a portion of the premium. Profits from these investments are shared with the policyholders in the form of dividend. Most insurance companies offer a (low) guaranteed rate of return that is exceeded by actual payments in most cases.
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Universal life insurance gives you a choice to decide how much you want to invest over and above the premium. However, the insurance company decides the investment vehicles (such as stocks, bonds, mortgages) in which your funds will be invested. Investment returns from these vehicles are accumulated in a cash value account that can be used either as premiums or allowed to accumulate.
Variable Life Insurance
Variable life insurance policy provides the customer with a wider selection of investment vehicles including stock funds. Similar to universal life insurance policy return on investment can be used both as a premium payout or accumulated in the account. Investment payment depends on the type of policy taken; beneficiaries either receive face value of the policy or face value plus whole or part of cash account.
Permanent Life Insurance
Permanent life insurance provides protective cover for the entire life of the insured and also provides an element that builds cash value. Permanent life insurance is presented as a fixed premium fixed return product. Permanent life insurance is more expensive than term life insurance because a component of the premiums are invested in the savings program.
Which Type Of Insurance Is Best Suited To Your Needs?
There are so many types of life insurance to choose from that you might get confused in your choice. Before deciding on the type of life insurance policy best suited to your needs you should discuss. By discussing your needs and circumstances with the insurance agent you would be able to identify the most appropriate option suited to your circumstances. It is not that if you do not have dependants or cannot spare a large chunk of your disposable income for buying life insurance you would not need life insurance. You need to make ensure that these expenses are met in case of your premature death. Life insurance should be decided upon keeping in view your income, dependents, liabilities and standard of living. The rule of thumb is that you should get insurance equal to around five to ten times of your annual salary. It is usually recommended that if you are under forty and do not have a family history of life threatening illnesses you should opt for term insurance offering death benefit but no cash value.
