Types of Life Insurance

There may be times when you watch your kids playing in the backyard, and there comes a scary thought to mind “What if I go now? Who will take care of them?”; this thought is indeed a scary thought. To tell you the truth, no rich heir will willingly adopt your children and your family soon after, if you were suddenly pass away because let us be realistic here, this is a real life and not a movie. So how is it possible you overcome this little problem? To this question, simple answer is Life Insurance.

For many people, the term life insurance is like sweet poison, a contradictory statement within itself. In other words, to have to pay for something extra every month is as painful to your ears like losing your right leg, but it may be also because the main problem is we’re not familiar with life insurance and the types of life insurance.

The first one is Single Premium Life insurance, it requires you to only pay a one time premium to enjoy its full insurance coverage. The insurance company would generally charge an annual fee to cover administrative charges and mortality risks. The interest rate will fluctuate for this type of insurance, but even then, it’s pretty minimal. Furthermore, loans are permitted to be taken for insurances of this kind, plus, most insurance companies try to change these policies to strictly meet federal tax law requirements, hence income tax would not be applied to a beneficiary’s death benefits.

The next one would be term life insurance, that provides a specific amount of life insurance coverage for a specific 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 loses his life within the policy time frame, the insurance company would pay the face value of the insurance, but if the person does not die within the time, he would be given nothing. Although this may look like a cheap bet, but many do buy term life insurance mainly because it’s the not that costly and acts as temporary security. There are also some convertible term life policies in which the insured may change his insurance type to another more permanent.

Whole life insurance is another type of insurance which will cover you throughout your life without considering the time the insurance was bought. Premiums can be paid throughout his life or within a smaller portion his life, depending on his paying capabilities. The investment part of the whole life policy is made up of bonds, stocks and mutual funds. It is usually tax free until a sum is withdrawn. Now that you know the many downsides and benefits of life insurance, it is up to you to decide which insurance policy to choose according to your convenience.