Life insurance can be a confusing thing to understand these days due to the overwhelming amount of different types of policies and products that are available on the market.
Although having a lot of choices and options with a life insurance policy is best for finding one that fits your individual situation and needs, choosing one out of the many can sometimes be difficult.
But if you understand the basics of life insurance, finding one that works for you will become a lot more uncomplicated.
There are actually two main types of life insurance and then a plethora of variations that stem from the two main types; being whole life insurance and term life insurance.
For clarity, whole life insurance sometimes goes by the names of permanent life insurance or universal life insurance.
A January 15, 2007 article from The Insurance News Net, “Understanding different types of life insurance policies,” explains the most important types of life insurance policies so consumers can make informed decisions about which policy is best for them.
“Term is the simplest: You pay a set premium for a certain period of time, and if you die during that time, money goes to the person you select as your beneficiary. Whole life policies cover you for life and also offer an investment value, and are more expensive.”
Term policies usually are purchased in terms of 10 or 20 years, although you can pretty much choose any length of time, depending on your insurance carrier.
Whole life policies are great in that they can help you build wealth by incorporating an investment component.
Before you decide which type of policy is the best match for your circumstances, you need to analyze your personal and financial situations and decide exactly what you want from your insurance policy.
“Charles Bailey, a certified public accountant in Hamden, said there are many factors to consider -- your age, your goals, and your immediate and long term financial requirements, for instance. ‘A lot depends on your needs -- are you responsible for tuition payments? Planning to buy a house?’ he said.”
“The first considerations must be how much financial protection your family needs, how long you need coverage, and how much you can afford to pay in premiums, according to the Connecticut Society of Certified Public Accountants in Rocky Hill.”
All of these things will help you to make an informed decision about your life insurance policy.
“If all you need is income protection for a set amount of time, term insurance is usually the way to go. For people with more complicated or long-term needs, whole life insurance or a variation may make sense, according to the society.”
“For example, if you have contributed the maximum to your retirement savings and other tax-sheltered plans, you might consider whole life insurance because the cash value in the policy builds up tax free.”
Regardless of which type of insurance product you choose, be sure you understand your policy fully and are working with a credible agency. Contact an LEI life agent for all of your life insurance questions.
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