Wednesday, October 6, 2010

Which One’s for You?

What are the different types of life insurance? There are mainly two types of life insurance, which is term life insurance and permanent life insurance. Term life insurance is a type of life insurance that only pays out if you die during the specific period of time that the insurance covers you for. Some term insurance policies can be renewed when you reach the end of the term, which depending on the company or policy can last from one to up to an amazing thirty years. Permanent insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time. Permanent policies are known as whole, ordinary, universal, adjustable and variable life. What are the advantages and disadvantages of term and permanent insurance? The following lists will at least offer a starting point to help you determine which type of insurance is best for you. Term Life Insurance: Advantages 1. Initial premiums are generally lower (i.e. cheaper) than for permanent insurance, which in turn allows you to buy the higher levels of coverage at a younger age, which is often when a good policy is most needed. 2. It's good for covering needs that will disappear with age, such as student loans, car loans, and mortgages. Disadvantages 1. Premiums increase with each passing year. 2. Coverage may terminate at the end of the term, or simply become too expensive to continue. Permanent Insurance: Advantages 1. As long as payments are kept up to date, the protection is guaranteed for life. 2. The policy accumulates a cash value against which you can borrow. (Note: there are some technicalities with that, so make sure to discuss all possible issues with your insurance company before taking this route). You can borrow against the policy's cash value to pay premiums or use the cash value to provide paid-up insurance. 3. A Provision or "rider" can be added to a policy that gives you the option to purchase additional insurance without taking a medical exam or having to furnish evidence of insurability Disadvantages 1. Required premium levels may make it hard to buy enough protection. 2. It may be more costly than term insurance if you don't keep it long enough. As with anything as complex as insurance, there are many other factors you will want to take into account before making a final decision, but with this as a starting point you will be on the right track to making the right decision when it comes to your protection.

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