Life insurance

Life insurance policy refers to the contact that a person enters with the insurance firm. After making premium payments, an insurance firm offers a lump sum amount referred to as the death benefit to the beneficiaries when the insured person dies. Basically, this insurance coverage is chosen depending on the goals and needs of the policyholder. Generally, the word ‘life insurance’ offers protection with a predetermined amount of time, whereas ‘permanent insurance, like universal and whole life, offers lifetime protection. It is worth noting that the death benefits of every type of life insurance coverage are basically free from income tax.

What Life Insurance Do I Need?

The ideal life insurance coverage for you when you only need coverage within a specified period or you’re focused on the most affordable one is the term life coverage. In addition, if you need to convert the term policy into while life policy, that choice is commonly available. If you’ve kids that will be financially independent and grown up by the time they reach 25 years, then the best option is still the term life coverage. However, one can prefer the whole life coverage if you’ve a lifetime dependant, you want to offer money for the estate tax or you need to spend the entire retirement savings and yet have some amount that will cover for the funeral expenses. Before selecting the type of life insurance coverage that you need, it’s highly recommended that you consult an expert in life insurance. Types of life insurance

There are various types of life insurance coverage. Some common types include; whole life, universal life and term life insurance.

Whole life coverage

This lies under the permanent type of life coverage. It is designed to offer lifetime insurance coverage. Since this policy covers a person for a lifetime, its premium payments are usually higher than those of term life coverage. In addition, the premium payments of this policy are basically fixed. Unlike the word, whole life tends to have the cash value that acts as the component of savings and might accumulate the tax-deferred with time. This coverage can be utilized as a tool of estate planning to assist in preserving the wealth that one intends to pass on to their beneficiaries.

Universal live coverage

This type of insurance also lies under the permanent life coverage. Unlike the whole life coverage, the policies of universal life coverage are flexible such that they might allow one to either lower or raise their coverage amounts or premium payment throughout the lifetime. In addition, the lifetime coverage makes the premium payments of universal life coverage to be basically higher than those of term life coverage.

This type of life coverage is mostly utilized as part of the flexible strategy of estate planning to assist in preserving wealth that will be passed on to the beneficiaries. The other common use of this type of coverage is for long term replacement of income, where the need goes beyond the working years. Some product designs of universal life coverage focus on offering on both the death benefit and building the cash value whereas others concentrate on offering the guaranteed death benefit.

Term life insurance coverage

This type of coverage has been designed to offer financial protection within a specified amount of time like 20 or 10 years. With the traditional term life coverage, the amount of premium payment remains the same within the period of coverage that you choose. When that period of time has elapsed, the policies might provide continued coverage, commonly at a considerably higher rate of premium payment. Generally, term life coverage is less costly that the permanent life coverage.

Term life coverage can be utilized to replace the lost potential revenue during the working years. This provides the safety net to the beneficiaries. In addition, it can ensure that the financial goals of the family can still be accomplished. These include goals like college payment, mortgage payment and keeping the business running. It is worth noting that, despite the fact that term life coverage may be utilized to replace the lost potential revenue, the benefits of life insurance aren’t paid through regular payments such as paychecks, instead they are paid in lump sum at a single time.