No one knows for sure what the future holds. We may be here today, but are we sure that we will still be around tomorrow? What happens to those who rely on us for financial support? What about our kids who are still studying? Responsible individuals prepare for the unexpected. Since passing away is imminent, and it is just a question of when it will occur, we have to be ready.
Obtaining life insurance is one means of being financially prepared. In its simplest form, life insurance is a contract that stipulates that upon the death of the insured, the insurer pays a designated beneficiary a specified amount. Such being the case, you may obtain a life insurance so that in the event that you pass away, your wife or your kids will receive monetary benefits.
This financial service has evolved through the years spawning different types of life insurance. And given the options, it is wise that you study each of them to determine the one that most befits your needs.
Types of Life Insurance
The two main categories of life insurance are protection policies and investment policies. The simple life insurance arrangement mentioned above is an example of the former, and is more commonly known as term insurance. With this type, you are provided insurance cover for a specified number of years (or term). And for the protection given, you are to pay a certain premium. It is pure insurance in nature and there is no provision for the accumulation of cash value.
But term insurance varies. A number of providers sell them with different combinations of face amount, premium, and term. So it is not enough that you decide on getting pure insurance, because you will still have to choose from the different variations available in the market. And this adds to the types of life insurance policies, and results in additional complexity in making a decision.
If you are after investing your funds and having insurance protection at the same time, then go for the investment policies. Again, there are several alternatives like whole life, universal life, and variable life. Whole life provides you with lifetime life insurance protection and cash value reserve that you may access at a specified period. However, this is at the expense of higher premium. Also, the premium and death benefits are prearranged and fixed. Universal life insurance, on the other hand, allows for variable premiums and death benefits. Compared to the first two, variable life insurance provides the most flexibility for investment, since it allows the policy holder to allocate a certain portion of the premium for this purpose. Needless to say, it is also the most expensive.
Choosing Your Life Insurance
It is necessary to understand the features of the different types of life insurance policies in order to make an intelligent choice. If there are terms and conditions that require further explanation, your agent should be in a position clarify these matters. Remember that your choice should depend on what you need and not what the agent is selling you. And do not hesitate to consult others.
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