Life Insurance - Types of Life Insurance
You're looking out the window watching your kids play in the backyard, and with that a scary thought comes to mind "What if I go now? Who will take care of them?"; what a scary thought indeed. In reality, no rich heir will willingly adopt your kids and your wife soon after, if you were to pass away because let us be realistic here, this isn't a movie. So how do you overcome this little problem? Simple, the answer is Life Insurance. For many of us, the word insurance is like sweet poison, a contradictory statement within itself. In other words, having to pay for something extra every month is as painful to your ears as losing your right leg, but maybe the main problem is because we're not familiar with life insurance and the many types of life insurance.
The first one would be Single Premium insurance requires you to only pay a one time premium to enjoy its full insurance coverage. The insurance company would usually charge an annual fee to cover administrative charges and mortality risks. The interest rate will usually fluctuate for this type of insurance, but even then, it's pretty minimal. Furthermore, loans are allowed to be taken for insurances of this type, plus, most insurance companies try to alter these policies to strictly meet federal tax law requirements so income tax would not be applied to a beneficiary's death benefits.
The next one would be term life insurance, which provides a specific amount of life safety coverage for a certain period of time. This type of insurance usually lasts for as long as 15 years. Unfortunately, there's a certain "risk" To this type of insurance. If the person dies within the policy time frame, the insurance company would payout the face value of the insurance, but IF the insured does not die within the time, he would be given nothing. Although this may seem like a cheap bet, many do buy term life insurance mainly because it's the least costly and acts as temporary security. There are also convertible term life policies in which the insured may change his insurance type to another more permanent.
Whole life insurance is a type of insurance which will cover you throughout your life without considering the time the insurance was bought. Premiums may be paid throughout his life or within a smaller portion his life, depending on his paying capabilities. The investment portion of the whole life policy is made up of stocks, bonds and mutual funds. It is usually tax free until a sum is withdrawn.