Various Kinds of Insurance Policies
An insurance policy is a legal contract between you and another party, usually an insurance company. The contract works to protect you just in case a particular instance, situation or loss should transpire. All kinds of insurance policies are helpful and beneficial. However, it is important it is for a person to have life insurance. That is, especially if he/she is the breadwinner of their family and will leave dependents on death.
Yes, a life insurance policy can’t replace a loved one. But it can go a long way in assisting with financial problems after death, such as funeral expenses. If after you need this kind of cover, the best time to get one is right away.
Death is so unpredictable! But having a life cover is the best way to prepare yourself for it financially. When looking for a cover, you will find that you have quite a few insurance policies to choose from. Your choice is of course a personal matter since the needs of a specific family are unique to them.
The basic three kinds of policies are Term Life, Whole Life and Universal Life.
Kinds of Insurance Policies – Term Life Insurance
Term Life insurance, as the name suggests, is active for a specific amount of time. This can be as little as 5 years to as many as 30 years. If you choose this policy, decide how much coverage you want your beneficiaries to receive when you die.
Also, have in mind that premiums increase every few years or so, but with this policy you have the option to choose a level premium which will not increase throughout the period of your policy. More importantly, you should know that your insurance coverage will only last as long as your policy is active; once it expires, you will lose your coverage. What’s more, if you outlive your policy, your beneficiaries will not receive any death benefit.
Kinds of Insurance Policies – Whole and Universal Life Insurance
A Whole Life and a Universal Life policy, on the other hand, cover the insured for his/ her entire life or until the person reaches the age of 100. The death benefit received at the end of this policy is undetermined as the policy owner is given the option to keep increasing its value through investments.
The difference between these two similar life assurance policies – Whole life and Universal life – is that the investment portion of a Universal life policy is invested into a money market, whereas the investment portion of a Whole life policy is invested into a stock market.
Both these insurance policies have very high premiums, which increase every few years. If you opt for either of these, you have to be prepared to part with quite an amount of your annual income each year, but you can rest assured that your beneficiaries are guaranteed to receive a sizeable payout in the event of your death.
Apart from the three policies mentioned above, there are others such as Single Premium Life and Variable Life insurance which might suit your needs as a family better. Whichever policy you end up choosing, make sure it is one that you will be able to afford and benefit from accordingly.
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All info was correct at time of publishing