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 buy life insurance? If you die you would want to know that your family will be taken care of. And if you have a business then it is really important also. If you have nobody to protect and you do not have a favorite charity you want to indulge then life insurance is not smart for you.
Term life insurance is the most popular. It is easy to understand and very affordable. Term is like renting life insurance for a certain amount of time. If that time runs out so does the life insurance. Most common terms are 10,20 and 30.
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.
Another kind of policy is Whole Life insurance. Whole life is just as it sounds. It is insurance that will cover you for your whole life. So as long as you keep up with the premium you will always be guarnteed your dependents will get something.
The advantage to Whole Life is it earns cash value. Cash Value is an amount of money you can receive if you should surrender your policy. Not to be confused with the Face Value. Face Value is the guarnteed amount your dependents will receive at your death.
There is also a Universal Life insurance. I would tell a newbie to the insurance world to be sure you understand all the details before opting for this type of policy. Basically the money you put into the policy you can invest in stocks and bonds and such to contribute to your death benfit. However, yor dependents would be guarnteed a minimum should you not invest well.
Last you have a variable. Variable works just like universal only the insurance company guarantees nothing. It is all based on your investments. Many people opt for a combination of these kinds of policies. They may have a Term policy as well as a Universal Policy.
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