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Basically, there are two different types of life insurance – permanent and term life insurance. Obviously, there are differences in both kinds of insurance, but they both offer the same end result; they will provide a lump sum of money to your dependents when you die. Another advantage of life insurance is the fact that the benefits are normally tax-free.
You will have to decide which type of insurance is best for you. Some factors you will need to consider include the amount of coverage you require, the cost of your premiums, your current health, your occupation and your age. If you don’t have any dependents, you may not require any life insurance. However, your family may still be burdened financially if you have any outstanding debts when you die or numerous expenses such as burial and funeral costs or medical expenses that must be paid. To help you with this decision, we’re going to discuss some of the issues concerning term life and permanent life insurance. Term life insurance Just as the name implies, term life insurance is meant to cover a policy holder for a limited period of time called a term. This type of policy is normally renewable, and it can include coverage that varies from one year to 100 years! With term life insurance, policy holders can make a claim on their policy if they suffer a major accident. A term life insurance policy will also pay death benefits to the family of the insured. Affordability of Term Life Coverage If you are a healthy individual who is younger than 40, you should consider purchasing term life insurance coverage. Unlike other types of insurance coverage, a term life insurance policy will not build any cash value. Therefore, you will pay less to purchase it. Many young couples who have young children choose term life insurance because it provides them with affordable coverage. Disadvantage of Term Life Coverage One of the main disadvantages of term life insurance is the fact that the price increases as you age. This make is more expensive than purchasing a permanent life insurance policy. Term life insurance can be very costly once you reach 65, and you may be denied coverage if the term of your policy extends beyond your 80th year. Types of Permanent life insurance Permanent life insurance includes three basic types: universal, variable universal and traditional whole life insurance. Variable life insurance: You can build up a cash reserve with a variable life insurance policy which enables you to invest your money for the future. The downside is that your death benefits may decrease if you don’t choose high-performing investments for your variable life insurance policy. Whole life insurance: One advantage of whole life insurance, also referred to as straight life or ordinary insurance, is a guaranteed minimum interest rate. With a whole life insurance policy, you will also be guaranteed death benefits and premiums. Even though you have no control over the investments, whole life insurance enables you to build a cash reserve. Universal life insurance: One of the biggest advantages of universal life insurance is its flexibility. Once you pass the medical examination, you can often choose to increase the amount of your death benefits. Another option is to choose the amount of your premiums, depending on your financial circumstances. For example, you may be able to increase or decrease your payments and use a portion of any accrued earnings to pay a portion of your premiums. The disadvantage is that you will normally pay more for the administrative costs associated with a universal life insurance policy. Now that you know a little more about permanent life and term life insurance, you can decide which option makes the most sense for you. There are advantages and disadvantages of each type of insurance. If you have any questions, be sure to discuss your situation and your needs with a reputable insurance company or a trusted insurance agent. |
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