Understanding Life Insurance in the Simplest Form
There are a lot of things to consider before you even get your own life insurance policy. One of which is the fact that you are uncertain to have one when you think about its significance and the need for it. 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. Policyholders are able to use it as liquid cash for their various needs as long as they purchased it with discretion.
Depending on the type of need, there are various types of policies that is customized to fit each these needs. You can also consider asking for an advice from a financial expert so that you may know what policy you really need by also considering the number of dependents you have.
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.
Getting a short-term life insurance is cheaper compared to a whole life insurance and this is common to young individuals who have dependents and those who have a house or car loan. During the initial years, the premium you pay is low but as the insured’s mortality risk increases as he age, the premium cost also increases making the premium almost equal to that of a whole life insurance.
There are two kinds of term insurance and these are the renewable term that has increasing premium and the level term that has a decreasing premium. At the beginning, premium cost for level term is very high compared to renewable term but after a few years, it becomes lower.
If you want features like ingrained cash value and life protection, you are looking for the whole life insurance. The thing is that the initial steep premium of this insurance might have exceeded the actual cost premium. You can use the surplus or the cash value to add in your separate account that you can use to give a level premium on the later part or use it for a tax-free investment. You are also guaranteed that you get the death benefit on the maturity or upon death of the insured aside from the cash value you have.
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