Types of Life Insurance
Term life insurance offers protection for a certain period of time. There are also permanent life policies that provide coverage for the entire lifetime. However, the cost of a permanent policy is generally higher than a term life policy. These are the two most common types of life insurance.
The basic premium of a policy is based on a rating that is based on the insured’s medical history and the type of occupation they have. The extra premium is calculated based on the risk classification of the applicant. Those classified as a substandard risk are charged an additional premium. The rate is also dependent on the life expectancy of the applicant. In other words, the younger a person is, the less the cost of a policy will be.
Most insurers require that you have an insurable interest in the life of the person being insured. This can include a spouse or close blood relative. It is important to know that you will not receive the death benefit if you do not have an insurable interest. Those who do not have an insurable interest will not be issued a policy.
Those who are young and healthy can purchase a term life policy. This type of insurance offers flexibility in terms of paying premiums and adjusting the amount of the death benefit. Term life policies usually last between 10 and 30 years. A term life policy may be converted to a permanent policy if the policyholder wishes. This option is available from some companies, including Prudential and Bestow.
A universal life insurance policy is a combination of term insurance and a cash account. It is similar to a whole life policy, but it is also known as a variable life. This type of policy will have a cash value that will be restricted as a living benefit. It is possible for a policyholder to withdraw this cash value to make loans against it. This will reduce the total amount of the death benefit. The cash value can also be used to fund an investment account.
The primary purpose of life insurance is to protect the insured from the financial burden of the death of a loved one. It is also a valuable legacy planning tool. It can help ensure the continuation of a company or business after a key employee’s death. Those who are considering purchasing a life insurance policy should speak with an insurance agent or financial advisor. They should compare prices and policies from several companies. They should also consider customer reviews and the services offered by the company.
When choosing a life insurance policy, it is important to understand the different types of coverage. Depending on the circumstances, it may be more affordable to purchase a term life policy than a permanent policy. You can also purchase a burial policy if you have a funeral to pay for. You can choose an annuity if you want to have a regular income. An annuity will provide you with an income for a specific number of years.