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Life insurance should be a one time purchase, but many people buy life insurance, let it lapse or expire and then have to purchase it again, usually when they are much older or have to search for one that will insure a person with pre-existing medical conditions. However, if purchased with the proper understanding, life insurance should be a one time purchase and should provide you with whatever protection you need for your family during your lifetime.  

What are the different types of life insurance?
Whenever a person believes he or she already has life insurance, an agent will sometimes ask what type the person owns. Usually the answer is something like—“Oh, it’s life insurance.” Or sometimes people say, “it’s term to 95,” indicating that they think their term policy is going to remain unchanged to 95 years of age. They could not be more mistaken, nor do they realize that there are three basic types of life insurance.

What is Term Life insurance?
Term life insurance—as the name indicates—is a policy that covers your for an initial “term,” usually 20 years although it can be less. A few companies offer 30 year terms if you are under age 40. The policy may say that it is renewable to age 85 or 95, but the price will start increasing dramatically after the initial term. The last year that the policy is renewable, the insured may have to pay more than half the entire face value of the policy.

Is Term worth buying if it is going to expire later?
Yes, term life is a good option if you only need protection for a set time period and have planned so that you will not need life insurance in later years. It is inexpensive and is available with numerous riders and a high face value.

What is a Whole Life Insurance policy?
Whole Life Insurance is the opposite of Term. Newer policies pay the death benefit to age 120 with most companies. However, you can cash it in for the full amount at age 100 if you so desire, and, if you leave it in force, you pay no premiums after age 100.

Is Whole Life expensive?
Cost is relative. It is more expensive than term, but can be purchased very reasonably if you are young. It also gives you life-long security as the policy will have a level death benefit and level premium for your entire life. It will build cash value against which you can borrow, and if at some point in the future you decide you do not need it, you can surrender it for the cash value. If you purchase based on an accurate analysis of your needs, you should never have to worry about life insurance again.

What is Universal Life Insurance?
Universal Life insurance is a cross between Term and Whole Life. It is the most difficult to understand because it is flexible and can be funded to work like either a Term or a Whole Life. Essentially, universal life is a type of policy that has a savings account separate from the insurance itself. This savings account—called the “accumulation account” is used to pay for the life insurance. Your premium goes into the savings account and accumulates interest. You can put almost any amount you want into the savings as long as you pay the minimum or more, and do not exceed the upper limit set by the government. Thus, you could fund it in such a way that within 20 years or so, you can have enough cash built up that you could actually stop your premium and let the policy pay for itself for the rest of your life. Universal is less expensive than whole life, but more than Term. However, once a person understands how a universal policy works, he /she is usually very pleased with the policy. Like Term and Whole life, it is also available with numerous riders and waivers.


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