Term Life Insurance makes economic sense
Purpose of Life Insurance
If you die, life insurance is designed to provide financially for those you have left behind and have
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- Laws and Life Insurance
- The following Questions represent the legal aspects of Life Insurance we think you will be most interested in. The information is not definitive nor is it exhaustive but simply an introduction into the legalities involved.
listed as your beneficiaries. In buying life insurance you, the insured, enter into a legal contract with the insurance company, also known as the insurer. Basically, the contract states that if you make your monthly insurance payments in a timely manner, your family or other beneficiaries will receive a specific amount of money when you pass on.
Although some may find the idea of life insurance distasteful, it is considered to be essential in protecting the fiscal health of your spouse and children should they find themselves fiscally taxed due to your death.
There are two primary types of insurance: permanent life and term life insurance. Each provides specific types of protection for your loved ones.
Term life insurance, the simplest form of life insurance, is designed to protect your family for a specified length of time or "term." Term policies, which range from 1 to thirty years, provide a one-time death benefit but no cash savings. This means term policies only provide benefits as long as the insured has paid the premium, which is the cost of the insurance. Premiums are divided into equal monthly payments that are assessed for the entire period of coverage. If you bought a policy that covered you for a three-year term, then you would make 36 equal premium payments on that policy.
Permanent insurance is designed to offer both a death benefit and an investment return after a length of time. Because this type of insurance offers a long-term savings plan, premiums are higher than those for term life insurance. Common types of permanent insurance are whole life, universal life, and variable universal life.
Term vs. Permanent
Term life insurance is especially appropriate for those who desire coverage for a specific length of time and who have limited funds. Because it is less expensive than permanent insurance, ( loans ) term can offer more coverage for less money. This is useful to people who have children, mortgages, and various types of loans. The right amount of term can ( mortgages ) cover these expenses and more. However, if you still desire coverage after a term policy's period ends, factors such as poor health and age will result in higher premiums when you buy a new policy.
Permanent insurance, although more expensive, allows policyholders various benefits, including a premium that will not change as you age or if your health deteriorates. Also, permanent insurance will usually accrue monetary value, offering the policyholder a return on their investment that they can access as worth builds.
Whole or ordinary life is the most common form of permanent insurance. With whole life your premiums and the face amount of the policy are fixed over the life of the policy. Your premiums must be paid regularly. A more flexible policy, where you can pay premiums at any time in just about any amount, is universal life. With this kind of coverage, you're allowed to modify the death benefit amount according to your needs.