When it comes to buying life insurance there is a bewildering choice of policies out there. Finding the right policy for you and your family can be done, but requires a little research.
This is an overview of the main types of insurance. The two main types of life insurance are term or whole life insurance.
Term life insurance
Term life insurance only pays out if you die, but cannot be traded in for cash at any point. This is the most common form of life insurance
Whole life insurance
A whole life policy does have a cash value and can be surrendered for money should you get into financial difficulties. If you do not surrender your policy before you die, your family will receive a payout in the event of your death.
Which is best a life or term policy?
The debate over term versus whole life insurance goes on. Some experts recommend that if you are under 40 years old and do not have a family disposition for a life threatening illness, go for term insurance, which offers a death benefit but no cash value.
Whole life offers both a death benefit and cash value, but is much more expensive. The Wall Street Journal has reported that half of all cash value policies are surrendered within the first seven years, making the coverage very expensive because commissions and fees limit the cash value in the early years.
With a traditional life insurance policy, the premiums stay the same over the life of the policy. The policy stays in effect until your death, even after you have paid all the premiums, which can often be paid up within a certain amount of time. A cash reserve is built up, but you have no control over how it is invested.
There are some other kinds of life insurance available. Here is a quick overview of the most common ones.
Variable Life insurance policies
Variable life polices build up a cash reserve that you can invest in any of the choices offered by the insurance company. The value of your cash reserve depends on how well those investments are doing.
Universal Life insurance policies
You can vary the amount of your premium with Universal life insurance policies by using part of your accumulated earnings to cover part of the premium cost. You can also vary the amount of the death benefit. For this flexibility, you will need to pay higher administrative fees. Check out www.thatsinsurance.com for more details.
Buying enough coverage
As with any policy, you need to think about what you are buying and what you are getting for your money. The idea of life insurance is to make sure that the costs of your funeral are covered and that the needs of any family you leave behind are covered.
You need to understand the details of the policy you are buying. The ThatsInsurance site is a good place to educate yourself. Not only are policies compared on this site, the details of what the various terms and jargon mean are all explained.