Life insurance policies Explained

Six basic types of life insurance

No matter how fancy the policy title or sales presentation might appear, all life insurance policies contain benefits derived from one or more of three basic types shown below. Some policies due combine more than one type of life insurance and can be confusing.

Term Life Insurance

Endowment Life Insurance

Whole Life Insurance

Variable Life Insurance

Universal life insurance

Variable Universal Life Insurance

Term Life Insurance

Term life insurance is death protection for a period of one year or more. Some companies are offering policies with terms up to thirty years. Premiums on term insurance remain level during the life of the policy. Term Life Insurance does not have a cash account. Death is only paid if you die within that year. Term insurance generally provides the largest immediate death protection for your dollar prize.

Some long-term policies of life insurance are renewable for one or more additional terms even if your health has changed. Each time you renew the policy for a new term, premiums will be higher. You should check the premiums at older ages and the length of time the policy can be continued.

Some short-term insurance policies are also convertible. This means that before the end of the conversion period, you can exchange the term policy for a whole life or endowment insurance policy even if they are in good health. Premiums for the new policy will be higher than what you paid for term insurance.

Life Insurance "Endowment"

An endowment insurance policy pays a sum or income to you, the insured, if you live at a certain age. If you were to die before then, the death benefit would be paid to the beneficiary. Cash prizes and values ​​for endowment insurance are higher for the same amount of whole life insurance. Thus endowment insurance gives you the least amount of death protection for your dollar prize.

Whole Life Insurance

Whole life insurance provides protection against death throughout the time of your life. The most common type is called straight life or ordinary life insurance, you pay the premiums themselves all the time in your life. These rewards may be many times higher than that you would pay initially for the same amount of term insurance. But they are smaller prizes would then pay if you were to keep renewing a term insurance policy until subsequent years.

Some whole life policies let you pay premiums for a shorter period, like 20 years or until age 65. Premiums for these policies are higher than for ordinary life insurance since the premium payments are squeezed into a shorter period.

Even if you pay higher premiums, to begin with, for whole life insurance than for term insurance, whole life insurance policies build cash values ​​that can occur if you stop paying premiums. Generally you can take the money or use it to buy some continuing insurance protection. Technically speaking, these values ​​are called nonforfeiture benefits. This refers to benefits is lost or ruined when you stop paying premiums. The amount of such benefits depends on the type of policy you have, its size, and how long you have owned.

A policy with cash values ​​may also be used as collateral for a loan. If you borrow from the life insurance company, the interest rate you receive in your policy. The money you must pay for a policy loan would be deducted from the benefits if you were to die, or the cash value if you were to stop paying premiums.

Variable Life Insurance

Variable life insurance provides permanent protection for you and your death beneficiary after your death. The value of death benefits may vary up or down depending on the performance portion of the investment policy. Most of the variable life insurance policies to ensure that the death benefit does not fall below a minimum level specified, however, a minimum value in cash is rarely guaranteed. Variable is a form of whole life insurance and investment risk is also considered a securities contract and is regulated as securities under the federal securities laws and must be sold with a prospectus.

Universal life insurance

The universal life insurance is a variation of whole life. The part of the insurance policy is separate from the portion of investment policy. The share of investment is invested in bonds and mortgages, the investment part of the Universal Life is invested in money market funds. The cash portion of the value of the policy is configured as an accumulation fund. Investment income is credited to the fund accumulation. The portion of the death benefit is paid from the fund accumulation. Unlike whole life insurance, the cash value of Universal Life Insurance grows at a variable rate. Normally, there is a guaranteed minimum interest rate applied to politics. No matter how badly the investments go 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 return will increase the cash portion of interest.

Variable-Universal Life

Variable universal life insurance, the beneficiary pays a death benefit. The amount of benefit depends on the success of your investment. If the investments there is a guaranteed minimum death paid to the beneficiary after your death. Variable universal gives you more control of the cash value account portion of your policy than any other type of insurance. A form of whole life insurance, has elements of both life insurance and contract bonds. Because the policy owner assumes investment risks, variable universal products are regulated as securities under the federal securities laws and must be sold with a prospectus.

Rates and coverage vary form state to state. Look around yourself and talk to an independent insurance agent to ensure you have a program for you. It 'amazing how much rates can vary from company to company for the same coverage .......