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Types Of Life Insurance - Which One Will You Need? |
Term Life Insurance
- Term life insurance is offered for a specific term, typically 20 to 30 years and is
usually the most reasonably
priced life insurance - although premiums increase as you age
because you are at higher risk of dying. You cannot
cash in term insurance because there is no cash
value. Term insurance usually does not require a
health checkup and premiums are paid monthly or
annually. In addition, you can renew up to age approximately age
95.
Mortgage Life Insurance 15 & 30
- Mortgage Life Insurance is available for 15 & 30
year mortgage terms and pays off your mortgage in
the event you die prematurely. You can choose the
amount based upon your mortgage balance. The death
benefit decreases as your mortgage balance decreases
so at the time of your death your beneficiary will
have the exact amount necessary to pay off your
mortgage. This means that your family will not have
to move out of the house if you die. Mortgage life
insurance is voluntary insurance and differs from
mortgage insurance or mortgage protection insurance
which your lender may require that you buy to pay
off your mortgage in the event of your premature
death.
Cash Value Policies
- Cash value policies have higher premiums. You can
borrow against your policy’s cash value by taking
out a loan. You can use the cash for whatever you
want such as retirement income, paying off medical
bills, taking a vacation, investment, etc. and the
company will deduct the amount from the balance of
the policy benefits at the time you pass away. Types
of cash value policies include: Universal Life,
Variable Life and Whole Life.
Universal Life Insurance
- This is more expensive than term life, but a lot
less than whole life insurance. It’s a cash value
policy that gives you flexibility in premium
payments. You may also make adjustments to the death
benefit amount. The premium amount that you pay is
credited by the insurance company to your policy
account that earns interest. Any expense charges are
also deducted from the account. Your account grows
by the amount of premiums you pay and the interest
you receive.
Variable Life Insurance
- Cash value and death benefits vary. Your insurance
company invests your cash values into separate
investment accounts such as stocks and bonds that
you choose. It’s similar to how mutual funds work.
Your cash value and death benefits will vary
depending on how much your increases and decreases
are in your separate investment accounts. You can
borrow against the policy.
Whole
Life Insurance
- This type of insurance is also called straight
life and provides you coverage during your entire
lifetime. Your premium will depend on what age you
are when you purchase the policy and it stays the
same as you grow older. It’s a good idea to buy the
policy when you are young so you have low premiums.
Your cash value grows beaus you get a fixed rate of
interest each year determined by the company. If you
want to make premium payments for a shorter time
period like 15 years, you can do so but your premium
will be higher. You can also borrow against the
policy.
Survivorship Life Insurance
- This type of policy insures two persons under one
policy and benefits are paid when the last person
passes away. The insurance is cheaper than whole
life because two deaths are less risk for the
insurance company. It is also known as second-to-die
life insurance or joint life insurance. Spouses buy
this type of insurance to use it for paying estate
taxes.
Business Life Insurance
- Key man insurance insures the life of a partner or
key executive and allows the business to keep
running after the person dies and until a
replacement person is found to run the business.
Buy/sell insurance goes hand and hand with a
buy/sell agreement that requires that a surviving
partner purchase the remainder of the business in
the event of the other partner's death. The buy/sell
insurance funds the purchase when a partner dies so
the remaining partner or partners can buy out the
deceased partner’s interest in accordance with the
buy/sell agreement.
Split Dollar Life Insurance
- This
insurance is basically a contract where a business
and the employee agree to share the ownership
interest, costs and proceeds of the employee’s life
insurance policy. It’s a way for a company to reward
an employee and financial assistance from the
company makes the life insurance affordable for the
employee. The company can also transfer ownership of
the policy to the employee when they retire.
Final Expense Life Insurance
- This is coverage intended to pay funeral costs and
for end of life medical care. Since funeral costs
can run between $1,000 to $10,000, besides having a
burial plot, planning ahead with final expense life
insurance makes sense. Face amounts on policies vary
from $5,000 to $50,000. Mainly elderly or ill
persons buy this type of insurance. Polices are
issued without a medical exam. This kind of
insurance can be categorized under guaranteed issue
or graded benefit life insurance. |
