The Anatomy of Life Insurance

Author: Russel Royan
Source: ezinearticles.com

Apart from food, shelter, clothing, education and the opportunities to living a good life, life insurance is an important thing you can give your children when you pass away. No one can claim otherwise as death is a certain event, that a insurance keeps your dreams for your family afloat when you leave them in this world we live in. Hence, it is important to understand the ins and outs of life insurance and what benefits can be derived from it.

A life insurance policy guarantees a certain amount to your family or any beneficiary/beneficiaries upon your death. For such, you will be paying a monthly premium for the said life insurance policy, with premiums varying depending on your age, gender, occupation, medical history and other factors specified. Other types of insurance provide benefits for the policy holder and the family while the former is still alive, a helpful aid to your retirement and for your kid’s educational purposes.

Many would ask, “Do I need life insurance?” The answer is always yes. Your monthly income provides for your family’s food, clothing, shelter, education, perks, vacations and many other things. What if you lose your monthly income? See, no matter how outstanding your work performance is or how good business is today, there’s a multitude of causes out there that may affect the stability and security you provide your family. That’s why you need insurance.

Now that you know how important insurance is, be sure to get the best term at a cost you can readily sacrifice for. Below are the types of insurance and their characteristics:

Term Life Insurance is the least expensive and the simplest type, with their policies that do not accrue cash value and are fixed for a given period. Premiums for this type are lowest when you are young and increases as you age. Term insurance can also be renewed and its policy pays your beneficiary a fixed amount after your death for the period that your policy stated.

Whole insurance provides cash value and over time, builds up a cash value on tax-deferred basis. Some insurance companies provide annual dividends as well. Whole insurance is sought for its added benefits of cash accessibility to its plan holder or beneficiaries even before the former’s demise. It is also usually used as a supplement to retirement funds or pay for the kids’ college education.

Universal life insurance is a flexible type of plan with policies accruing interest and allowing policy holder to adjust death benefits and premiums to current needs. This insurance type stays in effect as long as the plan holder’s cash value can cover policy costs.

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Insuring Your Whole Life

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Source: articledashboard.com

These days, life insurance has become a must. It provides protection to us and to our loved ones. Even if something untoward does happen, we can rest assured that the benefits will go to the right persons. In the world of today, money is security, and a life insurance plan goes a long way in providing this security. For some people, life insurance also works as an investment option. Insurance plans that build cash value and offer tax benefits can be regarded as being decent options for investment. However, insurance plans are primarily meant to build security. If one is looking for solely an investment option, it is a better idea to invest elsewhere.

These days, we have a whole range of life insurance options. Looking at the very basics, we have a choice between term life insurance (which provides coverage for a specific number of years) and whole life insurance (which provides coverage for one’s entire life). While both these come with their sets of pros and cons, I find myself in favor of the whole life insurance option. This possesses a number of positive aspects that is missing in the term life insurance option.

First of all, whole life insurance plans invest part of the money amount that serves as premium and help build cash value. After a period of time, it may so happen that the cash value itself manages to pay for the policy. This is a big plus that is absent in the term life option. Moreover, most whole life insurance plans require only a single medical examination. Thus, one can do away with the hassle of periodic medical check ups, unless one decides to alter one’s current plan. The tax savings that are incurred also work up to quite a large amount of money.

In addition to these advantages, you could also choose from among three basic kinds of whole life insurance. The first of these is the traditional whole life insurance. This promises to pay the insurer a minimum rate of return on his/her cash value. A second kind is whole life insurance that is interest-sensitive. In this case, the policy offers a variable rate on one’s cash value. The third type is one that involves a single premium. This is suitable for those who already have the cash to purchase an insurance policy. Thus, even after choosing between whole life and term life insurance, there are many other important decisions that have to be made.