Know The Difference In Life Insurance|Be A Better Consumer

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Become A Better Life Insurance Consumer

Topics: Insurance, Life Insurance Added on: Monday, July 6th, 2009 Posted by: yourwealthpuzzle Leave a Comment

Life insurance policies come in many different shapes and sizes in order to fit everyone’s financial needs.

There is a huge misunderstanding by consumers between the different life insurance policies. Due to this lack of knowledge, consumers make poor decisions when purchasing life insurance. Let’s change that.

There are many different life insurance policies available on the market today. You can buy term life insurance, whole life, universal life and variable life.

Which type of policy you choose all depends on your personal financial needs. Before you buy any life insurance, you must first determine your financial needs, that will determine how much insurance you need.

Your life insurance agent can work with you to determine your financial need. We will review the differences in the features and benefits of each type of life insurance policy so that you are a better consumer.

Term Life Insurance

Term life insurance policies are designed to provide coverage for a specific period of time, 10 years, 20 years, 30 years.
Term insurance is usually purchased for a specific reason.
A specific reason would be to cover the mortgage for the next 20 years if you should die before it is paid off.
Term insurance is used a lot to cover the children’s college education if the parent should die before they graduate from college.
The term policy does not build up any cash value, it is pure insurance.
It pays a death benefit when the insured dies.
Term life insurance is often compared to renting an apartment vs buying a house.
When you rent you do not build up any equity like you do when you buy a house.
When you buy term insurance you do not build up any “equity” or “cash value”.
Since it is pure insurance and does not accumulate cash value it is the least expensive form of life insurance.
Some insurance company’s do allow the insured to convert the term insurance policy to a permanent policy without a new medical exam.
Ask your life insurance agent about the conversion policy before you make your purchase.

Whole Life Insurance

Whole life insurance policies have premiums that stay constant throughout the life of the policy.
Whole life policies pay dividends.
Sometimes policyholders use the dividends to pay for the policy premium.
Whole life insurance policies have a guaranteed death benefit.
They also have a guaranteed cash value.
The cash value can be borrowed against.
Whole life insurance policies are a long term policy.

Universal Life Insurance

These policies offer flexible premium payments.
They have flexible death benefit options.
The cash value within a Universal life policy grows tax deferred.
The cash value is taxed at withdrawal.

Variable Life Insurance

The cash value within a variable life insurance policy varies.
The premium paymenst vary.
The variance is due to the type of investments.
The investments are tied to the performance of the market.
Market movements, cause the value of the investments to move also.
The cash value fluctuates with the performance of the market.

Your personal financial needs play a big role in the type of life insurance policy you should invest int. Call your life insurance agent for more detail on the other types of life insurance policies that are available.

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