Life Insurance Policies Explained
Life Insurance Policies Explained, Term life insurance is death insurance for a period of one or more years. Some companies offer insurance with maturities of up to thirty years. Time insurance premiums remain at the level of the life of the policy. Term Life Insurance has no cash value account. The death benefit is only paid if you die within this period of the year. Insurance generally provides the greatest protection against immediate death for your premium dollar.
Life Insurance Policies Explained, Some life insurance policies can be extended with one or more additional terms, even if your health has changed. Each time you renew the policy for a new period, the premiums will be higher. You should check the premiums at an older age and how long the insurance can be continued.
Some period insurance policies are also convertible. This means that before the end of the conversion period, you can change the overdue policy to an entire life or endowment insurance, even if you are not in good health. The premiums for the new policy will be higher than you paid for the insurance. Life Insurance Policies Explained.
Life insurance “legate”
Life Insurance Policies Explained, Endowment insurance pays out a sum or income to you, the policyholder if you are living to a certain age. If you were to die before then, the death benefit would be paid to your beneficiary. Premiums and cash values for endowment insurance are higher than the same amount for whole life insurance. Thus, endowment insurance gives you the least death protection for your premium dollar.
Whole Life Insurance
Whole life insurance policies provide protection against death for as long as you live. The most common type is called straight life or ordinary life insurance, for which you pay the same premiums for as long as you live. These premiums can be several times higher than you would initially pay for the same-time insurance. But they are less than the premiums you would eventually pay if you kept renewing the period of insurance until your later years. Life Insurance Policies Explained.
Life Insurance Policies Explained, Some life insurance policies allow you to pay premiums for a shorter period, such as 20 years or up to 65 years. The premiums for these insurances are higher than for ordinary life insurances as the premium payments are squeezed into a shorter period.
Even if you pay higher premiums, to begin with, for whole life insurance than for time insurance, whole life insurance policies develop cash values that you can get if you stop paying premiums. You can generally either take the cash or use it to buy a lasting insurance policy. Life Insurance Policies Explained.
Technically, these values are called non-lost benefits. This refers to benefits you do not lose or lose when you stop paying premiums. The size of these benefits depends on the type of policy you have, its size, and how long you have owned it.
A policy with cash values can also be used as collateral for a loan. If you borrow from a life insurance company, the interest rate is in your policy. All money you owe on a policy loan will be deducted from the benefits if you should die, or from the cash value if you stop paying premiums. Life Insurance Policies Explained.
Variable life insurance
Variable life insurance provides permanent protection for you and death benefits for your beneficiary at your death. The value of the death benefits may fluctuate up or down depending on the performance of the investment portion of the policy. Most variable life insurance policies guarantee that the death benefit does not fall below a specified minimum, however, a minimum cash value is rarely guaranteed. Variable is a form of life insurance, and due to investment risks, it is also considered a securities contract and is regulated as securities under federal securities laws and must be sold with a prospectus.
Universal Life Insurance
Universal life insurance is a variant of whole life. The insurance part of the policy is separate from the investment part of the policy. The investment part is invested in bonds and mortgages, and the investment part of Universal Life is invested in money market funds. The cash value portion of the policy is set up as an accumulation fund. The investment income is credited to the accumulation fund.
Life Insurance Policies Explained, The death benefit part is paid by the accumulation fund. Unlike Whole Life Insurance, the cash value of Universal Life Insurance grows at a variable rate. Usually, there is a guaranteed minimum interest rate on the policy. No matter how bad the investment goes by the insurance company, you are guaranteed a certain minimum return on the cash portion. If the insurance company does well with its investments, the interest return on the cash portion will increase.