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Life is full of uncertainty. So it's important that your beloved ones remain secured and financially supported even after the event of your death. So its important to know which life insurance policy will help to keep your family financially secured in future. Whole life insurance policy could be the best answer.
However, it's evident and of no amazement that people get confused and perplexed with so many different types of life insurance available, about what life insurance means and which one to choose that will work beneficially for them and their dearest ones.
To common awareness, people think life insurance to be a source of financial support that helps them to pay off their bills and help a roof over their head.
But suppose, unfortunately, in future if you get delayed with your salary or you are out of your job or meet with an accident, would you like your dependants to be in any financial difficulty? Certainly not!
Having a life insurance policy is the solution to this. This also holds your financial affairs and runs smoothly even after the event of your death.
This what exactly a whole life insurance policy assures you of – to keep the insured person financially secured for the whole life with the total sum assured which is payable upon your death.
Some whole life insurance companies have policies that offer you “with profit” option where an insured person gets bonus in addition to the total sum assured.
It has certain features like whole life cover, cash values, generation of dividends, and consistency in premium (unlike other life insurance policy such as term life insurance policy), etc, that make it really unique and distinguished from others.
More over the use of dividends can minimize the premium that you pay. In case you decide to cancel the policy you are paid with the “cash values” which grew as the premium was being paid.
Whole life insurance policy allows you to create a source of cash reserves with the payment of regular premium with all taxes deferred. It can also be used as supplementing retirement income.
Brief term life insurance explanation. Life insurance companies offer two basic types of policies...term life insurance and permanent life insurance. By far the simplest in structure are the term life policies. They are also favored by most people today because of cost. They are less expensive than permanent policies. That results with you being able to buy more life insurance for your dollar. That makes sense since life insurance was designed to protect your loved ones in the event of your death. Let us therefore look at detailed term life insurance explanations. How do these policies work?
Term life insurance provides death benefit protection for specified periods of time. The periods range from 1 year to 25 or 30 years and some even up to age 65, age 80 or age 90.
1 Year Term
The one year term policy is more popularly known as the yearly renewable term policy or the annual renewable term policy. As the name implies it provides a death benefit for a very inexpensive level premium for one year. The reason it is thought of as a one year term policy is that even though you can renew it there is a premium increase each tear if you choose to do so. For the first 5 years or so, even with the increase, the premiums are still quite inexpensive. After that period it can get quite expensive.
Upon your death the full face amount will be paid to your loved ones, regardless of how you die other than by suicide. If you should commit suicide within a certain number of years, usually 2 years, from the date you purchased the policy the death benefit will be limited to the premiums paid. If you committed suicide after that 2 year contestable period the full face amount of the policy will be paid.
If you buy any these policies you have the option of converting to a permanent life insurance policy within specified periods of time.
5 Year Term
Now let us look at a 5 year term life insurance explanation. The 5 year term life insurance policy is considered by this author to be a better deal than the one year term policy even though it costs a little more in premiums. The reason for this conclusion is that the premiums remain level for the entire 5 year period. This policy has a level death benefit as well which is paid upon the death of the insured. This type of insurance can be purchased as a separate policy but some companies also sell it as a rider to a permanent policy.
10 Year Term
Another participant among inexpensive short term policies is the 10 year term policy. Let us examine a 10 year term life insurance explanation. This policy is very similar to the 5 year level term policy but the premiums are a little more costly. You can keep this policy up to 10 years and the death benefit is paid to your loved ones in the event of your death.
15 Year, 20 Year, 25 Year And 30 Year Term
The main difference between the two policies described above and 15 year, 20 year, 25 year and 30 year term policies is that these policies can be kept for longer periods of time. The face amounts and premiums are level throughout with these policies. In some companies, however, the premiums of the 20 year term, the 25 year term and the 30 year term policies increase every 5 years. The first increase sometimes kick in after 5 years but in some cases the first increase occurs in 10 years.
Since I am giving you a term life insurance explanation I perhaps would be very remiss if I didn't mention riders that can be added to your policy.
Most life insurance companies allow you to add a waiver of premium rider to most any policy which says that if you should become disabled for usually a minimum of 6 months the life insurance company will step in and waive your premiums for as long as you are disabled even if it is for the rest of your life.
The accidental death benefit rider provides that if you should die in an accident the life insurance company will pay your beneficiaries twice the basic death benefit. If you therefore have a policy for $100,000 the life insurance company will pay $200,000...double indemnity.
I sincerely hope this brief term life insurance explanation will help you make a decision whether or not this type of life insurance would fit your needs.