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Life insurance provides financial security to your family in
the event of your death.
While many believe that single people (no dependants in the
broad meaning of the term) do not need life insurance; it could
become a great help in the event of a terminal illness, as most
policies include an accelerated benefit.
Another reason for having a life insurance policy is borrowing
money against it, which could temporarily ease financial hardship
situations.
How much life insurance does one need?
Every situation is different, but in general younger people
need more (because they just started paying off their home mortgages
or have other debts), and older people need less, since they already
have financial assets like savings, equity in their homes, retirement
plans etc. Life insurance should replace lost income,
or, cover the gap between income and living expenses.
Some common types of life insurance policies.
- Permanent life insurance, also known as whole or ordinary
insurance, is the policy where its value remains constant, and
the benefit is guaranteed as long as the policy premiums have
been paid.
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- Decreasing term
life is the policy which decreases in value every year,
and at the end of the term the value of the insurance equals
zero. These types of policies are used to secure debts like
home loans, which at some point in time will be paid off.
- Adjustable life insurance provides the ability to make changes
to the policy value, according to the needs of the policy holder,
but within certain limits imposed by the insurance company.
- Variable life
insurance is more of an investment than a life policy, since
most of the money is at risk, spread over different investments,
and the insurance company guarantees only the minimum value.
- Mortgage life insurance is the policy whose
value equals the amount you owe on your house. It is designed
to pay off the mortgage,
and its value decreases over time along with the amount of the
home loan.
- Group life insurance is offered to groups such as
employees through their work place, associations and various
other organizations. Group insurance is almost always the cheapest
insurance available to an individual. In many states, it is
mandatory for the insurance company to offer an option to convert
the policy (or certificate) if you leave the employer or stop
being a member of the group. However, the premiums will most
likely rise.
Related topics: finding
affordable life insurance, Insurance Information Institute
about life policy
types.
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