Life Insurance Polices in General
You can't turn on afternoon television without seeing at least five ads for term life insurance policies. These ads promise complete coverage, you can't be turned down because of your age or health, no medical checkups are needed, and all for less than a dollar a day. They almost always add that getting life insurance online, both quotes and coverage is easy.
It sounds almost too good to be true, but the truth is that good life insurance is available through online companies, or brick and mortar companies who now have websites. The trick is to know what kind and how much life insurance you need.
Life insurance -sometimes referred to as life assurance-is a sum of money paid to a beneficiary in the event of the insured's death. The money is typically used for burial expenses and paying final debts. The rest is inherited by the beneficiary, so you want to choose someone who you trust to make all of the final arrangements. This is the typical case, but it might not be. You may have chosen someone else to be the executor of your estate, and they will take care of all of your final needs, and the life insurance beneficiary simply inherits your policy.
Term life is the least expensive kind of policy. This policy has no cash value and pays a lump amount to your beneficiary upon your death. The policy limit is the same as the death benefit-a $100,000 policy pays $100,000. Term life money can be invested to cover what your paycheck would have brought in and pay your burial as well as final medical costs. Again, term life insurance is the simplest and most economical for the family who wants to cover their final expenses and leave the family a little something. However, there are other life insurance policies that do have cash value; these are called "cash value policies".
One such cash value account is with whole life insurance. The policies vary with each company, but the basics include payment of a death benefit to whomever you name as your beneficiary, and are tax deferred-offering a cash value account at low risk. As long as you keep your payments current, the premium is fixed, meaning that it can not increase during your lifetime. The insurance company will manage the cash value of the account but offers monthly or sometimes quarterly dividends. If you prefer, the dividends can be used as partial payment toward your policy. While you are still alive, it offers the option of withdrawing cash advances. However, you do not have the option of using it to invest in outside accounts, such as stocks or bonds. Whole life is much more involved than term life insurance.
Variable life insurance is more flexible but also has an increased risk. Like whole life, this type of policy pays a death benefit to your beneficiary and offers tax free accumulation of cash. You can also borrow against it during your lifetime. However, the difference is that with a variable, you are not guaranteed a specific amount of cash value while you are alive, and the benefits change in relation to the ups and downs of the market. Make sure you read the risks carefully when researching life insurance online.
Universal life insurance has a greater flexibility than either variable or whole. It provides for tax deferment and cash accumulation, the ability to borrow against it, and earn the current market rate on interest. The greater flexibility comes in on the premium and the face value of the policy.
The universal variable life insurance policy is by far the best one if you want total control over your cash value account. It provides for the usual-death benefits, tax deferred, etc-but allows you to invest in stocks and bonds. However, with this freedom comes responsibility; you must be the one to manage these accounts and if you cash out early you will incur a substantial penalty. Online companies suggest that you use this type of life insurance for large policies only-both quotes and coverage of this and all other term life are accessible online.
