HOW MUCH? - life insurance

Different types of life insurance and their benefits.


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.
  • 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.

Life Insurance
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  • 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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