Before you buy a life insurance or life assurance policy, make sure that you go into the contract with an understanding of life insurance and the different policies available to you.
Life insurance or life assurance policies are contracts. The contract is between the policy owner and the insurance company. The policy owner is usually the same as the policyholder. The contract terms depend upon the type of life insurance policy.
There are two types of life insurance policies, pure insurance policies or permanent insurance policies. Each type of policy has different terms and each type offers the policyholder different advantages.
To help you become a better consumer, let’s help you brush up on your knowledge of life insurance or life assurance. Life insurance is sometimes referred to as life assurance. Let’s review what you should know about the life insurance.
Life Insurance 101
The Value of Pure Life Insurance
- Pure life insurance policies are term life insurance policies.
- Term life insurance is just insurance coverage.
- There is not build up of cash value in a term life insurance policy.
- Term insurance is less expensive than permanent insurance.
- The premiums can usually remain the same throughout the policy term.
- Many people buy term and invest the difference; they keep their investments separate from their life insurance coverage.
- Term insurance works best if you are trying to cover short-term needs.
- Term insurance is often used to cover mortgages or the period of time children are in school.
- If something happens to you while you still have a mortgage, you don’t want your loved ones to carry the burden of that mortgage, so you can buy inexpensive term insurance to cover that financial need.
- If something happens to you while your children are still in college, you would want those expenses covered so that your children can finish college; so you can buy inexpensive term life insurance.
The Value of Permanent Insurance
- Permanent insurance policies are more expensive.
- They are expensive because these types of policies build up cash value.
- The value of a permanent insurance policy is you can combine your investments with your life insurance coverage.
- Permanent insurance can be universal life, whole life or variable life.
- Each type of permanent life insurance is used for different needs.
- Universal life insurance has more of a guarantee than variable life.
- The premiums on universal life insurance policies can vary.
- The cash values on whole life insurance policies are the most guaranteed of all types of permanent life insurance policies.
- The premiums of whole life are fixed.
- A variable life policy invests in sub-accounts which are similar to mutual funds, which are invested in stocks and bonds.
- The cash value varies based on the rise and fall of the markets.
- The premiums can vary on a variable life policy.
- Many investors use variable life insurance to help build up their retirement funds.
All life insurance policies are cheaper when you are younger. Your best financial move is to buy life insurance when you are young.
Every one has different financial needs; thus different life insurance needs. Before you buy a life insurance policy make sure you understand the financial needs you are trying to fulfill.
You should work with a financial broker or adviser to help you determine how much life insurance you need and which type of policy best fits your personal insurance needs.
The financial adviser can prepare a financial needs analysis for you. They have many financial tools available that you may not have available. They can help you sort through the mirage of information out there.