Why People Buy Life Insurance the Three Basic Categories
People buy life insurance because the odds of your house being destroyed by fire are considerably less than the possibility of your family losing your home through the untimely death or total disability of the breadwinner, because without your income your family would still have to make your monthly mortgage payments. Think about it.
How long would it take for your family to adjust to life without you? Two years… five years… maybe ten? And how long could your present savings and other insurance sustain them? To build adequate reserves to ease them over this period of adjustment could be costly, and could make you forfeit today’s pleasures for tomorrow’s security.
Life Insurance has three basic categories: term, permanent, and universal. Term Life Insurance insures your life for a set amount of years 10, 20, 25, or 30 years. If you die before the end of the term, your beneficiaries receive a lump sum equal to the face amount of the policy you purchased.
Term life insurance offers the greatest amount of protection for the lowest cost, also there is coverage that will return all your premiums back to you tax free if you do not use your coverage or out live your policy. Unlike other types of insurance, term policies have no investment component or increasing cash value just the essential promise of a pay out if you die while the policy is in force. Term policies give you the utmost budget flexibility should your needs change over time.
Whole Life Insurance is permanent insurance, covering you for your entire life, no matter how long you live. When you die, your beneficiaries receive a lump sum equal to the amount of the policy you purchased. A whole life policy also earns interest and builds tax-deferred cash values. Typically more expensive than other types of policies, whole life guarantees your family will receive a pay out when you die, while building up savings you can use on a permanent or short-term basis, also you can take loans out against the policy.
Universal Life Insurance is a flexible premium adjustable benefit, permanent life insurance policy that accumulates account value. It can be complicated and could be more expensive to purchase than other types of life insurance. The flexibility of this policy allows you to change the amount of premium payments as your needs for insurance change as long as your policy is funded, also you can skip payments from time to time.