It stands to reason that smart people do thorough research before buying Life insurance. They compare companies and policies’ terms and, as a result, they are more informed and aware about all pros and cons of different types of Life insurance. Unfortunately, when it comes to health insurance, many just trust the word of a local insurance agent and therefore often pick a policy with not the most beneficial terms. Anyway, before we’ll dive into details and specificity of Life insurance, we offer you to get some brilliant tips on health insurance for small business owners http://www.latimes.com/brandpublishing/businessplus/covered-california/la-expert-health-insurance-tips-20161205-story.html.
According to the survey, only 30% of all owners of life insurance truly understand what it means for them. They “just bought what sounded most trustworthy”. It’s totally unacceptable given that life insurance could become the most important financial asset you are going to own, especially, when you have several dependants you have to think and care about. Having no source of income, in case they have lost you, your beloved ones could find themselves in a position of being financially dry and unable to pay bills.
Below is the clear description of all types of life insurance with benefits and tricky aspects.
Term Life Insurance
Term life insurance means there is a certain term within which the policy is valid. If the holder dies within a certain period their dependants receive the amount of money, mentioned as “sum agreed” in the policy.
The holder of term life insurance pays annually fixed amount of money.
Usually, the term is set for 10-25 years, but you may vary it. If the holder outlives the term, the insurance terminates without any payments out to the holder.
Here is a tricky thing: the most important aspects are written with small fonts below the body of an agreement.
- Find out whether the “sum assured” is paid in case you are diagnosed with a deadly illness at the terminal stage. Some companies pay out, some don’t. Logically, that terminal diagnosis should be equaled to death as an insurable event.
- Make sure your policy doesn’t contain a specific disclaimer saying the money couldn’t be paid out if the insurance holder dies within a very short period of taking out cover. Some companies place that paragraph, written with a very small font, at the bottom of the page.
- Choose the policy where your annual fee is fixed no matter how old you get. It means you will pay same 300$ per year when you are 35 and when you are 55. Needless to say but the risk of death is higher when you are 55, comparing to your 35; still, some insurance companies allow unchanged premiums during the entire insurance term.
- When you purchase a cover, it’s always better to have your premium sums fixed, rather than reviewable.
Reviewable premiums mean your regular payments for life insurance policy may get increased depending on changes in your life’s circumstances (that is how insurer compensates raised risks).
Here you’ll find the most detailed guide on term life insurance http://www.thesimpledollar.com/life-insurance-guide/ with smart infographics.
Whole Life Insurance
Whole life insurance is also known as Straight life insurance and, unlike the term one, it covers the whole period of policyholder’s life.
This type of an insurance policy is more expensive (in terms of your premiums) for a reason. As it is a guaranteed fact that your sum (death benefit) will be paid out after your death, you’ll have to pay more for this certainty (comparing to the term life insurance policy when money is not paid out if the holder is alive after the policy’s termination).
The amount of premium payments and many other aspects could be defined during your meeting with the Agent. Some types of term insurance policies could be converted into the whole life insurance policy, but this conversion will cost you a certain fee.
There is a variety of Whole life insurance types and each type may suit your needs the best.
Here you’ll find detailed description of several types of whole life insurances with premiums adjusted to the certain type https://smartasset.com/life-insurance/compare-types-of-life-insurance.
In short, there are three main advantages of the Whole life insurance comparing to Term life insurance:
- Permanent coverage with no expiration date;
- Dividend option;
- Cash reserve (saving option).
It’s reasonable that you will pay higher premiums to have such advantages.
The detailed terms are defined by the insurer (and agreed with you) and many aspects are taken into consideration, such as holder’s age, health condition, financial state and type of occupation, etc. The whole process is similar to calculations made for car insurance, where dozens of aspects count. If you are interested in car insurance calculation – here is a very clever reading for you https://insurance.freeadvice.com/information/auto/article/7
Universal Life Insurance
This type of insurance is the most expensive one in terms of regular premiums a policyholder pays out. Still, Universal life insurance is, in fact, a flexible type of the Whole life insurance and gives a holder freedom to change premiums and coverage amount depending on his changing needs during life.
So, here are the main pros of Universal Life insurance comparing to the Whole life insurance:
- Flexible premiums, adjusted to changing life’s circumstances;
- Variable death benefit;
- Flexibility of policy loan.
Same as Whole life insurance, the Universal life policy also has so-called cash value which may rise over the time. Under the certain conditions, your policy’s cash value may even be used for paying your regular premiums. Read about all cons of Universal life insurance here https://www.thebalance.com/what-you-need-to-know-about-universal-life-insurance-2645831.