Life Insurance
 The
main reason for life insurance is to provide income replacement to your
beneficiaries if you die.
Term Life Insurance
Term insurance provides protection
for a specific number of years, with the death benefit paid to your beneficiaries
if you die during the policy's term. When the term ends, so does your coverage,
unless you renew the policy.
1.
Non-Guaranteed Term Life
Non-Guaranteed
term life provides coverage only for a short time (usually a year) and
is pure death-benefit protection. The risk with term life is that your
health might deteriorate and you could be unable to get another policy
once the term is up. Premiums can also increase dramatically as you age,
but term life insurance is usually a good choice for young people who can't
afford the higher expense of permanent insurance, or for people covering
specific needs that will disappear in time, such as a car loan or a mortgage.
2.
Renewable and Convertible Term
Renewable term
insurance offers a longer term, usually for five, 10, or 20 years. By buying
a longer term policy, your costs can be stretched out to avoid the annual
increases found in non-guaranteed term life.
Convertible
term is like renewable term but it also offers conversion to a permanent
policy in the future — when regular term premiums might become cost-prohibitive
or if your health declines. Convertible term policies usually provide the
maximum protection with the smallest amount of cash outlay required.
As the main
reason for life insurance is to provide income replacement to your beneficiaries
if you die, renewable and convertible term life could be a good choice
as it offers the maximum life insurance and also the option of converting
to permanent coverage in the future.
Whole Life Insurance
 Whole
life policies provide protection over your entire life. Whole life policies
work by stretching the cost of insurance out over a longer period of time
in order to level out the otherwise increasing cost of insurance. In this
case, however, it is spread not over a few years but over your entire life.
Your excess premium dollars are invested in the company's general portfolio.
For younger
people, whole life insurance is more expensive than term. But the premiums
generally are fixed, so as the years go by, it can become less expensive.
Cash values and interest accumulate in these policies are tax-deferred,
and you can borrow from the cash value. |
