Personal Insurance Basics: Life Insurance Facts To Know
If you're looking to protect your family's financial stability in the event of your death, life insurance is a key investment. The right life insurance policy can make all the difference because the policy's death benefit will provide an infusion of cash when it's needed the most. You won't have to worry about your loved ones making ends meet in the wake of your death when you have a life insurance policy that will pay out for them.
Term Policies
Term life insurance is valid for a clearly defined term, such as a ten or twenty-year term. It's a great investment for those looking for the best death-benefit-to-premium ratio and comes in a few different types.
Level term policies, for instance, provide you with a death benefit that is consistent throughout the term. The premiums, however, can vary between a fixed rate or a gradually increasing payment, depending on the policy.
Annual renewable term policies offer you coverage that's consistent throughout the term, but the premiums will increase with each year's renewal and will be age-dependent. You will, however, have the opportunity to renew that policy each year even if you've had major health changes. That remains the case throughout the term period.
A convertible term policy is a standard term policy, but it also includes a provision that allows you to convert the policy into permanent life coverage later, which is beneficial if you intend to invest in permanent life insurance down the road.
A return of premium term policy is one that gives you a refund of your paid premiums if you reach the end of the term period without paying out the death benefit. You can often add this to a term policy, but expect to pay higher premiums for this benefit.
Permanent Policies
Permanent life insurance is protection that is permanent throughout your life. As long as you pay your premiums, these policies remain valid and provide protection. You may or may not even have a policy that generates some cash value, which you can borrow against or withdraw if you need to.
Whole life policies are common permanent life policies and are the most traditional as well. You'll get fixed premiums for specific periods, and your policy will generate cash value in the early stages to help offset your policy premium increases that occur later in life. You can borrow against that cash value if you wish.
Variable life policies also generate cash value, and that cash value can be invested. You'll have the opportunity to invest your cash value in a variety of funds, which gives you the chance to potentially cover your premiums just through those investments.
Joint survivor policies are unique in that they provide coverage for two people in a single policy. These are often chosen by couples with a substantial estate because it allows them to ensure that their children don't bear the burden of estate taxes.
Single premium policies are, as the name suggests, a policy that comes with a single premium payment that pays the policy in full for its entirety. You won't have to worry about any future premium payments or the policy being canceled for non-payment due to any oversights.
For more information about personal insurance, contact an agency like Binyon Agency.
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