Life insurance of one type or another is a
key element in your financial security. It's also important
to those who survive you, whether you have a family, are single,
or are older and living alone. What life insurance you have,
or should have, depends on your situation and on your plans
for the future.
There are two basic types of life insurance: permanent insurance
that provides protection for life; and term insurance that
provides insurance coverage for a specific number of years.
Both types pay a death benefit if you should die with the
policy still in force.
Whole life is a common permanent policy that provides a guaranteed
death benefit, expressed as the face amount, for premiums
that are usually guaranteed to remain level regardless of
age or health changes throughout your life. Whole life policies
often pay dividends. These policies accumulate a cash value
that may be borrowed against, used to continue coverage if
premiums are missed, or withdrawn.
Universal life is a permanent interest-sensitive policy that
is more flexible and is divided into basic insurance and an
investment account. You can decide how much goes into each
and increase or decrease your premiums and the death benefits
within some limitations. Premiums and benefits can be readjusted
at specified times, depending on your insurance needs and
on what choices you make in the investment side of the policy.
Variable insurance contracts are another variation of permanent
life insurance. Premiums are usually guaranteed in these policies;
however, the cash values vary based on the performance of
an investment fund or other index. The death benefit consists
of one part that is guaranteed and a second part that varies,
depending on the fund's performance, subject to a guaranteed
Term-to-100 policies are often seen as permanent insurance
but their main characteristics are similar to other term insurance
policies. Most term-to-100 plans don't build cash values or
pay dividends. They provide a death benefit to age 100, if
the policy is kept in force, and have level premiums, regardless
of changes in age or health.
Basic term insurance policies are generally for a specified
period, such as one, five, 10 or more years, or to a specified
age. These contracts tend to have lower premiums while the
life insured is young, but when renewed for an additional
term period, the premiums can rise significantly. Term policies
are ideal to cover large obligations over a short period when
funds available for insurance are small. Most term policies
can be converted to a permanent policy under certain conditions.
Because of the many options available in life insurance policies,
a knowledgeable, trained life insurance advisor is invaluable
in finding the right policy to meet your present and future
needs most effectively