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Life Insurance

If you have anyone that is dependent upon you or if you simply want to ensure you are not a burden to those you love when you pass away, you might want to consider obtaining life insurance.  With the help of a life insurance policy, you can make certain those you love are financially protected and won’t be placed in a difficult financial position when you pass away.

Types of Life Insurance

Once you have decided to obtain life insurance, you will need to decide upon the type of life insurance coverage you need.  You might be surprised to find that there are actually many different types of life insurance policies you can obtain.  The two main options are term life insurance and whole life insurance. 

Term life insurance only stays in place for a pre-determined length of time.  Depending upon the type of policy you have, you may be able to renew the policy once the policy has expired.  Whole life insurance, on the other hand, is meant to stay in place for the long term and stays in place until you either cancel it or fail to make your premium payments.

There are several varieties of term life insurance that you can choose to obtain.  These include:

  • Decreasing Term Life Insurance – also referred to as mortgage protection cover, the sum of money you receive decreases as the policy gets older.  This is because this type of coverage is intended to cover mortgage debt, which decreases over time, or other types of capital that need to be protected.
  • Increasing Term Insurance – the value of this insurance increases over time in order to compensate for inflation
  • Level Term Insurance – pays a lump sum of money if you die while the policy is in place.  The sum of money you receive is guaranteed and the amount does not change throughout the life of the policy.
  • Convertible Term Insurance – a form of level term insurance that offers the option of converting to endowment or insurance or whole life insurance.
  • Renewable Term Insurance – remains in place for only a predetermined amount of time, but can be continued without a health review when the policy expires
  • Index Linked Term Insurance – offers the option to increase the premium each year as it relates to the Retail Price Index

By understanding the various types of insurance policies available, you can easily determine which is right for you.

Considering Your Options

When shopping around for a whole life insurance policy, you will find that there are many different options available to you.  The primary options you have available include:

  • Maximum Cover Option
  • Balanced Cover
  • Guaranteed Rate

With the maximum cover option, your premiums are reviews regularly.  As a result, they may increase or your coverage amount may decrease.  Therefore, your cost for this coverage may go up during your lifetime.

Balanced cover, which is also referred to as standard cover, charges a set premium amount through the lifetime of the policy.  In order to determine the premium amount, the insurance company calculates the cost of carrying you into older age and then averages the cost.  Therefore, you will pay more during your younger years than you would with the maximum cover option, but you will pay less when you are older.

The guaranteed rate option is similar to balanced cover because your premium rates don’t change, but your premiums do not depend upon the performance of the investment of your policy.

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