Things You Need to Know About Life Insurance
Getting a life insurance policy is not a very simple decision to make and it takes a lot of thinking first. The most common of them is the fact that you are doubtful on the importance and significance of having a life insurance. 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.
Life insurances also offer built-in cash value, reaping dividends and tax-free investment aside from the fact that it gives protection to you. Purchasing it with discretion can lead a policyholder to utilize it as liquid cash which he can use whenever he needs it.
Depending on the type of need, there are various types of policies that is customized to fit each these needs. Also, consulting a financial expert can help you identify what policy you will have to get by considering also the number of dependents you have.
There are two basic forms of life insurances: the whole life insurance and the term life insurance. Other terms for a term life insurance policy are temporary or short-term life insurances. This type of insurance can only protect and give death benefits to individuals who were insured during a specified period of the policy they got. But when the person insured gets to live beyond the time specified in the term insurance policy, he will not get any money 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 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.
A whole life insurance on the other hand has an ingrained cash value and guarantees life protection. The thing is that the initial steep premium of this insurance might have exceeded the actual cost premium. The surplus or cash value you will get from this can be utilized as a tax-free investment when transferred to a separate account or be used to help give you a level premium late on. Aside from this cash value, death benefit can be gained on the maturity of this policy or upon death of the insured person.
Resource: Full Article