Life Insurance : Types of Life Insurance in USA.
Life Insurance Policy is a contract between Life Insurance Company and the Person Insured for Term or Whole Life. Policy protects to suffer from economic loss and pay insured sum to the dependants or family members in the event of death of insured person.
There are two types of Life Insurance:
1. Term Life Insurance
The name is self explained which implies, term insurance provides protection for a specific period of time and generally pays a benefit only if you die during the
"term." Term periods typically range from one year to 30 years, with 20 years being the most common term.
One of the biggest advantages of term insurance is its lower initial cost in comparison to permanent insurance. Why is it cheaper when
initially purchased? Because with term insurance, you're generally just paying for the death benefit, the lump sum payment your
beneficiaries will receive if you die during the term of the policy. With most permanent policies, your premiums help fund the death benefit
and can accumulate cash value.
Term insurance is often a good choice for people in their family-formation years, especially if they're on a tight budget, because it allows
them to buy high levels of coverage when the need for protection is often greatest. Term insurance is also a good option for covering needs
that will disappear in time. For instance, if paying for college is a major financial concern but you're pretty sure that you won't need life
insurance coverage after the kids graduate, then it might make sense to buy a term policy that'll get you through the college years.
So if you're considering a term policy, make sure you carefully consider how long you'll need the coverage. If you're pretty sure that your
needs are temporary, then term insurance is probably the right choice for you. But if you think there's a possibility that you might need the
coverage for a long time, then remember that if you want to renew your term policy after it expires or buy a new term policy at that time,
your age, health status or other factors may make coverage very expensive.
To better understand term insurance, consider this analogy. When you purchase term insurance, it's sort of like renting a house. When you
rent, you get the full and immediate use of the house and all that goes with it, but only for as long as you continue paying rent. As soon as
your lease expires, you must leave. Even if you rented the house for 30 years, you have no "equity" or value that belongs to you.
When considering a term purchase, one thing to keep in mind is that not all term policies are the same. Some may include certain
provisions as standard features, while others may require you to pay extra to add these features as "riders" to your policy. So if you're
comparing term policies, remember that price is not the only factor to consider. Ask your agent about provisions such as:
- Accelerated death benefits - allows a terminally ill person to collect a significant portion of his or her policy's death benefit while that
person is still alive.
- Disability waiver of premium - waives premiums when a policy owner suffers a long-term disability, typically one lasting six months or
- Accidental death benefits - doubles or triples the benefit in the case of death by accidental means.
2. Whole Life Insurance
Whole / Permanent insurance provides lifelong protection and the ability to accumulate cash value on a tax-deferred basis. Unlike term insurance, a
permanent insurance policy will remain in force for as long as you continue to pay your premiums. Because these policies are designed and
priced for you to keep over a long period of time, this may be the wrong type of insurance for you if you don't have a long-term need for life insurance coverage.
Actually the need for life insurance often persists long after the kids have graduated college or the mortgage has been paid off. If you
died the day after your youngest child graduated from college, your spouse would still be faced with daily living expenses. And what if your
spouse outlives you by 10, 20 or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable
your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?
Cash Value : a key feature
Another key characteristic of permanent insurance is a feature known as cash value or cash-surrender value. In fact, permanent insurance
is often referred to as cash-value insurance because these types of policies can build cash value over time, as well as provide a death
benefit to your beneficiaries.
Whole Life or Ordinary Life
If you're the kind of person who likes predictability over time, Whole Life insurance might be right for you. It provides you with the
certainty of a guaranteed amount of death benefit and a guaranteed rate of return on your cash values. And you'll have a level premium that
is guaranteed to never increase for life.
For detailed information and Personalised Life Insurance do call us at: 1-800-238-4295.
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