Life Insurance, put-simply
What is Life Insurance?
Life insurance is a process in which the insured pays a sum of money
for in order to guarantee that the sum of money is designated to a chosen
beneficiary when the insured passes away. There are two times of life
insurance, temporary and permanent.
Temporary Life Insurance:
Term Life Insurance:
Under term life insurance, one pays a certain sum of money, or premium, for
one “term.” A term can range from one to thirty years, depending on the need
of the client. This type of insurance protects only in the event of death.
If the insured passes away while under term life insurance, the paid sum of
money is given to a chosen beneficiary.
If the insured does not pass away during the term, he or she is able to
renew the term life insurance at a higher cost that reflects his or her age.
This type of life insurance does not build cash value, so for most people,
term insurance is the most affordable type of life insurance available.
Permanent Life Insurance:
Whole Life Insurance:
Under whole life insurance, one is provided with a fixed death benefit and
premium over his or her entire lifetime. Unlike term life insurance, whole
life insurance allows a portion of one’s premium to go towards his or her
cash value, which may help pay off the entire policy in a short amount of
time. During this policy, one will have a fixed cost without any future
medical re-examining.
Although whole life insurance gives many benefits to the insured, the
rate of return under this insurance policy is very low compared to other
policies.
Universal Life Insurance:
Under universal life insurance, one is provided with permanent
insurance coverage while getting a more flexible premium payment and a
higher rate of return than whole life insurance. Under this policy, besides
accumulating savings, one may not have to pay a premium payment the entire
time he or she is insured under this policy. This is because when the cash
in the savings portion of the insurance plan accumulates to a certain sum of
money, the premiums no longer have to be paid.
This type of insurance is best for people who feel they need to be
insured into at least their seventies. This would give the savings portion
of the insurance plan enough time to accumulate into a worth while
investment.
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