Life Insurance Policies Explained

Six Basic Kinds of Life Insurance

Regardless of how fancy the policy title or sales presentation might appear, all life insurance policies contain benefits derived from one or more of the three basic kinds shown below. Some policies due combine more than one kind of life insurance and can be confusing.

Term Life Insurance

Endowment Life Insurance

Whole Life Insurance

Variable Life Insurance

Universal Life Insurance

Variable Universal Life Insurance

Term Life Insurance

Term life insurance is death protection for a term of one or more years. Some companies are offering policies with terms up to thirty years. Premiums on term insurance remain level during the life of the policy. Term Life Insurance has no cash value account. Death benefits will be paid only if you die within that term of years. Term insurance generally provides the largest immediate death protection for your premium dollar.

Some term life insurance policies are renewable for one or more additional terms even if your health has changed. Each time you renew the policy for a new term, premiums will be higher. You should check the premiums at older ages and the length of time the policy can be continued.

Some term insurance policies are also convertible. This means that before the end of the conversion period, you may trade the term policy for a whole life or endowment insurance policy even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

Life Insurance "Endowment"

An endowment insurance policy pays a sum or income to you, the policyholder, if you live to a certain age. If you were to die before then, the death benefit would be paid to your beneficiary. Premiums and cash values for endowment insurance are higher than for the same amount of whole life insurance. Thus endowment insurance gives you the least amount of death protection for your premium dollar.

Whole Life Insurance

Whole life insurance gives death protection for as long as you live. The most common type is called straight life or ordinary life insurance, for which you pay the same premiums for as long as you live. These premiums can be several times higher than you would pay initially for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term insurance policy until your later years.

Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher than for ordinary life insurance since the premium payments are squeezed into a shorter period.

Although you pay higher premiums, to begin with, for whole life insurance than for term insurance, whole life insurance policies develop cash values which you may have if you stop paying premiums. You can generally either take the cash, or use it to buy some continuing insurance protection. Technically speaking, these values are called nonforfeiture benefits. This refers to benefits you do not lose or forfeit when you stop paying premiums. The amount of these benefits depends on the kind of policy you have, its size, and how long you have owned it.

A policy with cash values may also be used as collateral for a loan. If you borrow from the life insurance company, the rate of interest is shown in your policy. Any money which you owe on a policy loan would be deducted from the benefits if you were to die, or from the cash value if you were to stop paying premiums.

Variable Life Insurance

Variable life insurance, provides permanent protection for you and death benefits to your beneficiary upon your death. The value of the death benefits may fluctuate up or down depending on the performance of the investment portion of the policy. Most variable life insurance policies guarantee that the death benefit will not fall below a specified minimum, however, a minimum cash value is seldom guaranteed. Variable is a form of whole life insurance and because of investment risks it is also considered a securities contract and is regulated as securities under the Federal Securities Laws and must be sold with a prospectus.

Universal Life Insurance

Universal Life insurance is a variation of Whole Life. The insurance part of the policy is separated from the investment portion of the policy. The investment portion is invested in bonds and mortgages, the investment portion of Universal Life is invested in money market funds. The cash value portion of the policy is set up as an accumulation fund. Investment income is credited to the accumulation fund. The death benefit portion is paid for out of the accumulation fund. Unlike Whole Life Insurance, the cash value of Universal Life Insurance grows at a variable rate. Normally, there is a guaranteed minimum interest rate applied to the policy. No matter how badly the investments go by the insurance company, you are guaranteed a certain minimal return on the cash portion. If the insurance company does well with its investments, the interest return on the cash portion will increase.

Variable-Universal Life

Variable universal life insurance pays your beneficiary a death benefit. The amount of the benefit is dependant on the success of your investments. If the investments fail, there is a guaranteed minimum death benefit paid to your beneficiary upon your death. Variable universal gives you more control of the cash value account portion of your policy than any other insurance type. A form of whole life insurance, it has elements of both life insurance and a securities contract. Because the policy owner assumes investment risks, variable universal products are regulated as securities under the Federal Securities Laws and must be sold with a prospectus.

Rates and coverage vary form state to state. Shop around on your own and talk to an independent insurance agent to make sure you get a plan that's right for you. It's amazing how much rates may vary from company to company for the same coverage.

Matt McWilliams is one of the co-founders of HometownQuotes.Com, an online insurance quotes web site. He is originally from Pinebluff, NC and attended Middle Tennessee State University. He is considered an expert in the field of online insurance shopping and finding new ways to help consumers save money on their insurance. For more information visit http://www.hometownquotes.com

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Life insurance basics explained - Secrets of any affordable insurance quotes

When you explore the options for life insurance, the average consumer is presented with a bewildering range of companies and choice in products. Breaking things to the basics of simple life insurance can be a daunting task. One of the first decisions a person must do is the choice between any temporary life insurance and life insurance. And while a term life insurance quote can be significantly cheaper than a whole life insurance quote, it is not always the preferred option for many people.
If the question arises - why a person would prefer a policy of all life on a political life term? The response can often be found in the fact that people are looking for a plan of the life of coverage, but also an investment / savings vehicle. Provided that a person pays on her life insurance, it is covered at the time of death with a whole life plan. Protect your family against financial disaster after your death and ensure that may be paid the funeral expenses is the main reasons behind the obtaining of quality whole life insurance.
One of the secrets in locking in a rate affordable life insurance overall (which can compete with payments typically temporary life insurance premium below), is to begin early in life. Starting at a young age, a person can usually pay the premiums - even if he or she has at the request of lower death benefits early. These death benefits can be enhanced later when the budget will allow. In this simple way, a person can obtain a whole life without overloading its budget.
Once a person has decided the option to go with a whole life insurance plan, the next step is to request quotations from various insurance companies. It is important to do your homework on this stage. Shop for a variety of quotes from insurance. Make sure you ask lots of questions and find a company that can provide for the payment of benefits higher compared to the cost of the premium. You may not install on the first insurance quote you don't really understand your choices until you have several alternatives to compare. And it is also important to remember that you are under no obligation to purchase insurance of any kind that you go through this process of quotation of the best for you.
People may wonder if there are all good methods to obtain a quote for really cheap life insurance which can be much less time. There is in effect. A great way to find the overall cheaper life insurance quotes is to check the things online. More and more insurance companies provide an online interface to provide a place for consumers to access the quotes from life insurance. These companies are often able to provide less expensive this way citations, since online access helps spend less. The convenience of the use of these Web sites to obtain quotes for life insurance online is a great help for the consumer. Such an interface online provides consumers with easy access to compare many quotes from insurance companies in a short period of time.
Get together best life insurance quotes is not a delicate phenomenon with today's Internet. A little research and education on the basics of life insurance are at your fingertips. An individual must compare things like the cost of the premium, length of the payment, a real benefit to be paid, etc. Homework in advance a little can ensure that you find citations of life insurance together affordable and the future.

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