Life insurance is essential for financial planning, and is one of the most common types of insurance that people purchase. Purchasing one is not something that is done on a whim, but is something that needs a lot of forethought and research. You need to understand why you need life insurance, what it can do for you, and what type you can get before taking the next step.
Why Purchase Life Insurance?When there are people dependent on your income, such as your spouse and children, life insurance will be able to replace that lost income if ever you die or become disabled. Life insurance can also costs for funeral and burial, administration costs, and medical expenses and debts that were not covered by your health insurance, federal and state taxes – everyone knows that these things can cost much. Some types of life insurance can also be a source of savings for you. You can create a cash value that you can loan out or borrow at your request when you need it.
What Type of Life Insurance Do I Get?There are two different types of life insurance, and these are term life insurance and whole life insurance.
Term life insurance is the most basic type of life insurance, and provides coverage only during the policy’s term, which usually lasts from one to thirty years. Other than that, most term life insurance policies do not have any other provisions for benefits. Level term life insurance policy and decreasing term life insurance policy are the two basic subtypes of term life insurance. For level term life insurance, the death benefit that your dependents get is the same throughout the whole duration of the life insurance policy. For decreasing term life insurance, on the other hand, the death benefit decreases per year over the policy’s term.
Whole Life Insurance is also known as Permanent Life Insurance, and this type of insurance is not based on any term. Your dependent receive death benefit even if you die at a hundred years old.This type of life insurance has three different subtypes, and these are universal life life insurance, variable universal life insurance and traditional whole life insurance. Traditional whole life insurance, also known as ordinary life insurance is the most common among whole life insurance policies. This type covers your beneficiaries by offering a death benefit and a savings account to come along with it. Universal/Adjustable life insurance on the other hand is more flexible than its traditional counterpart. With this type of life insurance, you can increase your death benefit if you pass their required medical examination. A savings vehicles (which is also known as your cash value account) earns you money from interest. Variable life insurance combines death coverage and a savings account that can be invested in bonds, stocks and mutual funds in the money market.While your money grows more quickly than other investments,you risk more if your investments do not do well.These are the essential types of life insurance and its subcategories. Choosing among these can be quite difficult if you do not know what you want. So being well informed is a must before making a purchase. Do research on the internet and speak to a local life insurance agent to make sure that the life insurance you purchase matches your needs and your family’s coverage needs.
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