A Brief Definition of Life Insurance
There are a lot of things to consider before you even get your own life insurance policy. One factor is your doubtful side on getting one since you don’t know if there is really a need for it and its significance. But this life insurance is being considered by people who think about their financial future in case of death of any of their family members.
Aside from giving protection to you, life insurances also offer a opportunity to have a reaping dividend, built-in cash value and a tax-free investment. If you purchased it with due discretion, you can utilize it as a liquid cash to help you with your different needs.
There are a lot of different types of life insurance that can cater to the different needs of various individuals. It is also a wise decision if you consult a financial expert to help you pinpoint the right policy for you by also considering the number of dependents you have right now.
You can choose between the two basic forms of insurances and these are the whole life insurances and term life insurances. A term life insurance policy is also known as the short-term life insurance or a the temporary life insurance. The term insurance policy can only cater to those individuals who died between the specified periods of time of the policy they have enrolled. But in case the person lives past the time specified on the term, he will not get anything at all.
Short-term policies are cheaper than a whole life insurance that’s why young individuals who have dependents prefer to get it as well as those who have car or home loans. The premium rate of this insurance is very low at first but once the insured grows older, the premium cost will increase due to the fact that morality risk is already high at that time which makes the premium cost almost equal to that of a whole life insurance.
There are two types of term insurances and these are the level term (decreasing premium) and the annual renewable term (increasing premium). The premium for a level term is high for the first years compared to that of a renewable term but it decreases in the later years.
If you want features like ingrained cash value and life protection, you are looking for the whole life insurance. The initial steep premiums of this type of insurance may exceed the insurance’s actual cost. The surplus you get from it or the cash value is added to a separate account that you may use for a tax-free investment to reap dividends or it can also give a level premium on the latter part. Aside from this cash value, death benefit can be gained on the maturity of this policy or upon death of the insured person.
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