A Brief Definition of Life Insurance

There are a lot of things to consider before you even get your own life insurance policy. One factor is your doubtful side on getting one since you don’t know if there is really a need for it and its significance. But there are people who get a life insurance because they think about the future of their financial status once any member of the family dies.

Life insurances also offer built-in cash value, reaping dividends and tax-free investment aside from the fact that it gives protection to you. If you purchased it with due discretion, you can utilize it as a liquid cash to help you with your different needs.

There are different types of life insurances that can cater the different needs of various people. It is also a wise decision if you consult a financial expert to help you pinpoint the right policy for you by also considering the number of dependents you have right now.

There are two basic forms of life insurances: the whole life insurance and the term life insurance. Other terms for a term life insurance policy are temporary or short-term life insurances. This type of insurance can only protect and give death benefits to individuals who were insured during a specified period of the policy they got. But when the person insured gets to live beyond the time specified in the term insurance policy, he will not get any money at all.

Those availing short-term policies are those individuals that are young and already have dependents or a house or car loan and they prefer this because it is much cheaper than having a whole life insurance. But the premium costs for this type of insurance gradually increases once the insured age since there is higher mortality risk when he grows old making the premium almost equal to that a whole life insurance.

There are two types of term insurances and these are the level term (decreasing premium) and the annual renewable term (increasing premium). The premium for a level term is high for the first years compared to that of a renewable term but it decreases in the later years.

If you want features like ingrained cash value and life protection, you are looking for the whole life insurance. The initial steep premiums of this type of insurance may exceed the insurance’s actual cost. The surplus or cash value you will get from this can be utilized as a tax-free investment when transferred to a separate account or be used to help give you a level premium late on. You are also guaranteed that you get the death benefit on the maturity or upon death of the insured aside from the cash value you have.

Source: my blog