There are so many reasons to get life insurance. You want to provide for your loved ones after you are gone. Maybe you want your business to keep running after your death, or donate to a cherished cause. Life insurance should help ease your worries, but the process of researching and purchasing life insurance can be confusing and complicated.
Figuring out how much life insurance you need is known in the insurance business as an estimate. For a start, have a seat and ponder over how much insurance you would buy if you didn’t have to worry about the pricetag on it. Now take that idealized insurance idea and look into the market to see how much it would actually cost you. Don’t try to acquire a policy you can’t afford to maintain for the long haul. It’s better to have a slightly cheaper insurance policy that’s there when you intended it to be, than it is to have more expensive life insurance that you have to drop before you pass.
Also consider which type of life insurance you’ll need: term, whole, or universal life. Term only lasts for a specified amount of time – usually 10 to 30 years. You can choose the term, and the amount of coverage, but remember: the longer the term, the higher the price; the higher the value, the higher the price. Term life covers you if you pass away during the term of the policy. However, if you do not, no insurance will be paid out and there’s no accumulated cash value. Although this sounds like a bad deal, term tends to be the cheapest form of insurance and is a good option for those who cannot afford whole life.
Whole life, on the other hand, is designed to cover a person until they die, as long as the policy is still viable; that is, as long as you pay the premiums in full and on time. With whole life you can also often pay it up through a certain period, such as ten years. Because this type of policy will inevitably pay out, it’s not as good a risk for the insurance company and will cost a little more than term life, but will never expire, making it worth the extra cost if you can afford it.
These policies aren’t mutually exclusive. You can, if you’re a family man with plenty of responsibilities, take out a long-duration term policy, and then also get a smaller whole life policy as well. This will keep you covered for both the short term in case of disaster and the long term once the term insurance expires.
Finally there’s universal life insurance. Like whole life insurance, it doesn’t have an expiration date. It’s considerably more detailed than the other types of insurance, separating aspects of insurance that are commonly packaged together. Because of this extra layer of organization, some customers will prefer universal insurance to combine insurance with personal savings. Once the insurance builds up enough monetary worth it can be borrowed against, and the face value itself can even go up. Universal life insurance is sufficiently complex that it would take a whole new article to really explain it, but those are the basics.
Universal life insurance is like whole life insurance in that it does not expire as long as the policyholder keeps the policy. It differs from regular whole life insurance in that it places the life insurance and the cash value in separate accounts, whereas regular whole life insurance keeps them together. Largely due to tax considerations, this type of life insurance is attractive to many people as a way to unite life insurance and savings. You can withdraw or borrow against the policy once it accrues enough cash value. You may even see an increase in the face value of the policy. This explanation of universal life insurance is very barebones, since a full explanation of it would require another article.
Susan Reynolds is the webmaster for a leading South African Life Insurance provider. For more information visit: http://life.insurance123.co.za/
categories: Insurance,Finance,Life Insurance,Life Cover,Health,Death,Disability,People
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