There’s a saying that life insurance is already sold; you just haven’t bought it yet. One may not like to reflect on one’s mortality, but the consequences of not preparing your loved ones for your eventual passing on are far worse than spending money on a life insurance policy.
What if you’re the breadwinner, for instance? Who’s going to make sure that some form of support is there for your family while they find their footing again?
Who’s going to pay for the property taxes, for repairs to the house, for the last few payments for the kids’ college plan?
Are you really going to cast them adrift without leaving a legacy of comfort behind, even if it’s just a small one?
That beneficiary check may prove to be a precious source of solace for your wife, the only real incoming money in a time of upheaval.
Term Life Insurance Policies
It’s for these and other reasons why people get life insurance policies, but another consideration is the type of life insurance policy one is going to get.
Some policies limit themselves to paying the beneficiaries if the holder of the policy dies within the term of the contract.
These are known as term life insurance policies or ‘pure’ life insurance policies. Term insurance policies are offered for a set number of years, and if the insured person is still alive at the expiration of the policy, there is no money returned.
(A newer form of insurance called ‘Return of Premium’ insurance does this but can be more expensive than a term life insurance policy.)
Permanent Life Insurance Policies
Other kinds of policies give the holder and their beneficiaries the option to convert a part of the premium being paid into cash, usually through some sort of investment or savings scheme.
These are known variously as whole life insurance, permanent life insurance or ‘cash value’ life insurance policies and usually have more expensive premiums as part of the money (called the reserve) is invested or put into some form of savings. These are subdivided into further types.
Traditional whole life insurance offers the most safety, as there are stipulated minimum death benefits and guaranteed cash values.
In most whole life insurance packages being offered today, the dividends can be used to lower your premiums, increase the cash value and/or the benefits or be refunded.
Universal life insurance is more flexible than traditional whole life insurance. The policy holder can pay different amounts on the premiums and sometimes defer payment altogether.
Universal life insurance usually comes with capped maximum premiums and minimum guaranteed benefits and cash value amounts. They earn interest at a rate predetermined each year instead of earning dividends.
Variable life insurance comes with the least amount of guarantees and is probably an option to be taken by a knowledgeable investor.
There are set premiums with a guaranteed minimum death benefit amount but with no guarantee on the cash value of the policy.
Instead of the reserve part of your premium being invested in a de facto investment or fund package, you will have to select where you want to invest your money in. The most common offerings are mutual funds.
Life Insurance Quotes
There are also many hybrid deals out there which combine features of two or more types of policies.
The best thing to do would be to shop around and talk to insurance agents and get yourself a couple of life insurance quotes.
A life insurance quote is basically a summary, giving you the details such as benefits, premiums to be paid, terms offered, and so on.
They are often easier to understand than the policies themselves, which may be couched in legalese that even a lawyer would cringe at going through.
While comparison shopping, it’s best to get the advice of an independent professional to help you determine what options are best for you and what policies would suit you best.
Some insurers have a presence online and offer quotes at the click of a mouse button, while others refuse to do this, preferring that prospective customers meet their agents face-to-face, so you will have to adjust your efforts to cope with these factors like these.
But it’s going to be all worth it, isn’t it?
