Life Insurance
There are different types of Life Insurance like Term, Whole Life, Universal
and Burial.
Term Life Insurance>
Term Life Insurance has different types like Term Mortgage which is tied to
your home mortgage and Return of Premium Term.
ROP "Return of Premium is a type of Life Insurance in which all of the
premiums paid in, are returned to the payee after the specified period of time
has ended.
Example: 20 year Return of Premium life insurance will cut you a check
after all premiums have been paid (I.E. after the 20 year period is up). There
are also different amounts of years you can lock in a price from 15 to 30 years.
Your premium will stay the same even if you become ill (I.E. Cancer, Heart
Attack, Stroke, Diabetes). You can even combine Term mortgage and Return of
Premium. This benefit would mean you are covered during the mortgage period and
if death benefit is not paid out during that period of time. You would get a big
check from the life insurance company after paying off your mortgage. If
something was to happen and the death benefit was paid you would get only the
death benefit and not an additional return of your premium.
Whole Life Insurance>
Whole Life is a product that covers you to age 95 or above, depending on the
life insurance policy and life insurance company. It is a bit like a savings
account with life insurance attached to it. Once the policy has a cash value
generally you can borrow or with draw from it. You can even skip payments if
times get tough and the life insurance policy will not lapse. There are
different types of whole life as well.
Universal Life Insurance>
Universal Life Insurance offers a balance between face amount, premium, and
cash value. A bonus feature allows for large cash drop-ins and face amounts that
start at $25,000. Universal Life Insurance also has a target premium guarantee.
Universal Life Insurance is one of the most flexible types of Life Insurance.
You can pay less starting out, take withdraws or a loan, skip payments if need
be. There are different options on Universal Life Insurance as well. They are
called option 1 (A) or option 2 (B). Option 1 or option A as it is called by
some life insurance companies is the preferred option of the 2 different types
of options. Mainly because of the lower cost of insurance in later years. Option
1 states: the insured will receive upon death the specified death benefit.
Option2 or Option B states that the insured will receive upon death the full
specified death benefit and any cash value built up in the policy. Most people
hearing about Option 2 think that is the way I they should go. They ask
themselves” why leave any money on the table for the insurance company to keep?”
After reading the Cost of Insurance you will see why option1 is the way most
people go.
Level Premiums>
All Life Insurance is usually sold with a level premium whether it is term,
universal or whole life insurance. This means you will pay the same premium for
as long as you own the policy. In other words if you purchased 10 year term life
insurance your rates will stay the same all 10 years. If you purchased Whole or
Universal Life Insurance your premium will stay the same for as long as you have
the policy. Level premiums will only be affected in Universal or Whole Life
Insurance if the premium being paid into the policy is not the target premium.
Meaning it is less than the specified amount or if the holder of the policy
takes out a loan or withdraw, skips payments and does not repay the amount he
took out or skipped. It will in years to come affect the premium he or she will
need to pay. They will have to start paying a much higher premium if this is not
caught in time.
Cash Value Build-up / Policy Fund>
The policy fund can do many things for the insured. They can borrow or
withdraw from this fund. They can even skip payments or pay less than the target
premium. If any of these are done the best thing to do is repay the loan and/or
catch up on any missed payments. While you will not see any effects for several
years. These types of actions do have an affect your account. In later years,
the premium will be raised up dramatically and if you are unable to pay them the
policy will lapse.
COI> Cost of Insurance
Everyone knows that life insurance costs money and that the older you get
the more life insurance will cost. When you are young the cost of insurance is
very low, because the likelihood of your death is very low. As people age the
likelihood of them dying goes up and so does the cost of insuring them. In the
case of Universal of Whole Life Insurance the cost of insurance is still taken
from the age of the person, but to get the actual cost of insurance the cash in
the policy fund is subtracted from the death benefit. This lowers the amount of
money the life insurance company will be out when a death benefit is paid.
Therefore the affect will be lower cost of insurance for the individual.
Example: The insured is 78 year old male and has a $100,000 whole life insurance
policy with an option 1 and a cash policy fund of $12,000. His cost of insurance
is based on a 78 year old male with an $88,000 whole life insurance policy
instead of a 78 year old male with a $100,000 policy. The insurance company will
keep the $12,000 and pay out for him $100,000 upon his death. The cost of
insurance on a 78 year old male is less on an $88,000 policy than on a $100,000;
so his cost of insurance will be lower.
Burial>
Burial Insurance is meant just for the burial of a person at the time of death.
It is just another name for whole life insurance with one exception. You can
plan your funeral ahead of time. This will save your loved ones the headache of
doing it for you. Upon death your wishes are carried out. There are different
ways of paying for this type of Insurance. You can pay on it your whole life or
it can be paid up in 20 years..