Life insurance is always a sensitive topic to bring up in the household. Most families put off looking into life insurance simply because of what it implies. Not only that, it can be difficult to understand all the different varieties of life insurance and the benefits they provide. If you want to cover costs and continue to provide for your family in the event of a tragedy then taking out life insurance is the most responsible thing you can do. Lets quickly look at the various types of life insurance policies that are available.
Like the name implies, whole life insurance purpose is to last till your death. In carries higher premiums due to its life span. Part of the premium you pay each month goes into building a cash value based on investments made by your insurance company. The rest of your premium goes into overhead costs and the insurance portion of your policy. The cash value builds tax-free overtime until it is withdrawn, however you may also use the cash value to pay for your premiums as they increase over the years.
Universal life insurance is tied to money market rates and returns. It combines an investment fund with your life coverage. Because of its investment properties no guarantee can be made on the rate you would receive.
Variable life is divided into two separate components. One component is compromised of various investments within the insurance companies portfolio. The other component, the general account, is a liability account of the provider and is not used within the policy. As depicted in the name, variable life insurance is based off investments and the benefits fluctuate over time.
Variable Universal Life
Variable universal is a combination of both Variable and Universal insurance. It allows more flexibility, however since the policy is classified as a security the SEC regulates it. With every investment there is fluctuation that can’t be guaranteed by the insurance agent.
Term life is the most common and safest type of life insurance. Term life often suites the needs of most depending on your circumstances. Each month you pay a premium that increases as you get older. In the event of a tragedy the insurance pays out the amount you set when you take out the policy. There is a maximum term period allowed on term policies though, often 30 years.
Now you should know a bit about life insurance and with the help of an independent financial advisor determine which policy is the best for you. Be responsible and protect your family in the event a tragedy was to occur to you or a loved one.
Information credit to Drayden Insurance Ltd., an Edmonton Life Insurance Company.