Life Insurance Basics

Life insurance is a financial contract between the policy holder and an insurer where a benefit is paid to the beneficiaries in the event the insurer dies.That was a mouthful…in other words if you have an insurance policy and pass away; the money is paid to those you put down to receive a set amount of your insurance.

There are two types of life insurance I will talk about – Term Life Insurance and Permanent Life Insurance.

Term life insurance will provide you protection for a limited period of time, hence the “term”. The beneficiaries will only be paid if the policy holder dies during a specified time. The plus of having term life insurance is that there is a reduced cost compared to permanent life insurance.

Term life insurance is a supplement to permanent life insurance – it provides a large amount of coverage for the lowest costs. The policy holder has the ability to convert their term policy to a permanent policy.

Term policies are available in renewable or level term basis. Renewable policies can be issued on a 1, 5, 10, 15 or 20 year basis. Shorter term insurance plans are cheaper compared to going into a longer term. You have the options to add a variety of additional riders, such as accidental death, disability premium waiver, etc depending on who you are insuring with.

Permanent life insurance is as it implies protection for life. Whole life insurance offers you a guaranteed cash value accumulation and a consistent premium. Another form of life insurance offered is universal life insurance. Universal life insurance allows you to have flexibility when it comes to premiums are to be paid and a consistent premium and what amount they would be. Variable life insurance follows a combination of whole or universal life. It shifts the investment risks to the consumer giving the potential for greater returns.

I will get more into where you can find the insurance provider that suits your needs.