Find The Right Type Of Life Insurance Policy For You!
Life insurance is a basic financial planning tool because it offers both asset protection and survivor support after an insured’s death. American insurance companies underwrite different types of life insurance policies.
As the insured gets older, he or she earns a better income, builds a home and family, and retires. Some life insurance coverage is inexpensively purchased to secure a death benefit. Other life insurance policies offer the insured income and investment options.
Term Life Policies
A term life insurance policy offers the insured’s beneficiaries a guaranteed benefit at his or her death. The term life insurance policy provides insurance coverage for a certain time period. With age, the insured’s risk of death increases and premiums typically increase. Some term life insurance policies terminates when the insured reaches a certain age. After policy termination, the insured’s required premiums cease and his or her insurance coverage is void.
Typically, the insured buys term insurance with a fixed death benefit and premium amounts. Term life insurance premiums are usually less expensive than whole life insurance premiums. The term life insurance buyer is not usually required to submit to a medical exam. Some underwriters require medical history disclosure. Some American insurance companies may require a medical exam before agreeing the write the policy.
Whole Life Insurance
Whole life insurance, sometimes referred to as permanent life insurance, offers guaranteed cover for the insured’s life as long as he or she pays premiums on schedule. Whole life insurance, like term life insurance, provides a guaranteed death benefit to the insured’s survivors. Premiums for this type of life insurance are usually fixed and almost always higher than term life insurance premiums.
An average whole life insurance policy accrues cash value that continues to increase over the insured’s cover period. Premium payments may be invested into mutual funds, allowing the insured to shelter asset growth from current taxes. Some whole life insurance policies also pay dividends to the policyholder.
Importantly, the insured can use the whole life insurance policy as financial collateral or lend himself or herself money against the policy’s cash value.
Life Insurance Riders
American life insurance companies may sell optional a la carte riders to a life insurance policy. Riders, sometimes referred to as endorsements, facilitate the policyholder’s needs. For instance, some life insurance riders specify additional coverage for the insured’s dependents. Others allow the insured to access income or cash withdrawals if the insured becomes disabled. The policy may also contain an accidental death rider. If the insured dies from an accident, his or her survivors may earn an increased payout of benefits.