When thinking about purchasing life insurance it can be very overwhelming. There are so many terms and details that are hard to make since of. Life insurance is a great way to protect your future and you should look at a few basics to help you understand.
Why do people buy life insurance? They buy life insurance for the pure fact of leaving family or a business with plenty of money to manage life without them. People want to leave this earth knowing there assets are protected. If you have no family, business or charity you wish to take care of then you should not invest.
The most popular of them all is Term Life Insurance. Term is simple and affordable to most budgets. Term Life is buying Life Insurance for only a specified length of time. Terms can be 10,20 or 30. If you out live your term the policy pays nothing.
Basically, you pay a fixed premium for a fixed amount of time. If you die during the term the policy will pay someone on your behalf. If it expires you get nothing. A change in health status does not affect the policy, the catch is once the term has been reached it completely vanishes.
Whole life insurance is another choice. Whole life covers you for your whole life. It never ends as long as you contimue to pay the premium. Premiums can go up every year however. Yu continue paying the premium up until the day you die.
One advantage to purchasing a Whole Life policy is that it earns a Cash Value. The Cash Value is the amount you would be paid if you should cancel your policy before your death. Some confuse this with the Face Value. Face Value is the amount it will pay your dependents if you keep the policy.
There is also universal and this insurance is for the more seasoned shopper. It combines investment and death benefit. You invest into money market, stocks and bonds which will contribute to your death benefit. However no matter who well your investments go you will be guaranteed a minimum amount to pay out at the time of death.
Variable Life is similar to Universal. Only the death benefit varies depending on how your investments do. So you are not guarnteed a minimum death benefit for your dependents. This kind of plan is not for the unseasoned investor.
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