Term Life Insurance
Term Life insurance is considered to be the most basic form of life insurance that can be purchased. This is because term life offers just pure death benefit protection only, without any cash value build up within the policy. Because of this, term life insurance is often very affordable – especially for those applicants who are younger and in good health at the time they apply for the coverage. With term life insurance, coverage is purchased for a certain length of time, such as for ten years, 15 years, 20 years, 25 years, 30 years – and in some cases, even longer. There is also a 1-year renewable term life insurance option that is offered by many of the best insurance carriers. Typically, when purchasing a level term life insurance policy, the amount of the premium will remain the same throughout the period that the policy is in force. Provided that the insured survives throughout the time period of the policy, and he or she wishes to remain covered by life insurance, they will need to re-qualify for a new policy at their then-current age and health status. At that time, the premium on a new life insurance policy may be quite a bit higher. In some cases, a term life insurance policy may have an option to convert the coverage over into a permanent life insurance plan.
Whole Life Insurance
The simplest type of permanent life insurance coverage is whole life. With this type of coverage, the premium amount is locked in and will remain the same throughout the entire lifetime of the policy. This can be helpful for those who need to stick to a budget. It also means that if a person purchases a whole life policy at a very young age, they will still pay the same amount of premium when they get older – regardless of advancing age, or even an adverse health issue. In some cases, where a person’s pre-existing conditions require the individual to buy high risk life insurance, some graded whole life policies are the only option. The cash that is in the cash value component of a whole life insurance policy is allowed to grow on a tax-deferred basis. This means that the gain on these funds will not be taxed until or unless they are withdrawn – allowing them to compound exponentially over time. At first, the cash in a whole life insurance policy will grow slowly. However, over the years, the cash in a whole life policy can steadily grow, often with a minimum guaranteed rate of return. Some whole life insurance policies will even provide dividends to their policyholders. Because these are considered to be a return of premium to the policyholder, they are also not taxed. Dividends can also help the cash value in a policy grow significantly – although they are never guaranteed.
Another form of permanent coverage is universal life insurance. This type of life insurance also provides a death benefit and a cash value component where the funds are allowed to grow tax-deferred.Universal life insurance is more flexible than whole life coverage, though. This is because the policyholder is allowed – within certain guidelines – to choose how much of his or her premium dollars will go towards the policy’s death benefit, and how much will go towards the policy’s cash value.Because universal life is a permanent life insurance policy, the policyholder will have access to their cash value account.So, just as with a whole life plan, the cash can be borrowed or withdrawn for any reason – including paying off debt, supplementing retirement income, or even going on a vacation.
Disability Insurance coverage provides a portion of the insured’s earned income with monthly payments while disabled due to an accident or illness. If you become disabled, disability insurance provides income to a predetermined age and for a stated amount (i.e. $5,000 per month) while on claim. Benefits can range from 2 years, 5 years, or until age 65, 67 or 70.
Critical Illness Insurance coverage pays a cash benefit directly to the insured in the event they are diagnosed with a covered critical illness (i.e. heart disease & cancer). The payment is based on the elected benefit amount of coverage ranging from $25,000 up to $250,000. These policies help with all expenses regardless of your income or your health insurance coverage. The benefit is paid to the insured and can be used as needed (i.e. house payments, car payments, family trip, or medical expenses). These policies can be customized to fit any budget and meet individual needs.
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