Life insurance is great for individuals that have a family, dependents and earn the most income to support their family. Life is unpredictable and it is important to ensure your family and loved ones are taken care of financially in case anything happens to you.
When shopping for life insurance, searching online and using the internet's resources are a great way to educate yourself on life insurance basics, shop and compare quotes for the best policy for you. There are three different types of policies – universal, whole, and term life insurance.
* Universal – combines insurance with savings. Insurers are able to have the benefits of term life insurance and combine that with tax-deferred interest accumulating savings account. Sometimes you may not even have to pay premiums during the entire policy. If your money to pay the death benefit and other costs accumulates in the tax-deferred savings portion of your policy, then promotions may not be required to keep the policy in force.
* Whole – this type of policy will cover you for your entire life. Your death benefit and premium generally remain the same. It also builds cash value, which could enable you to earn a return on a portion of your premiums that the insurance company invests. Your cash value is tax-deferred until you withdraw it and you are also able to borrow against that money.
* Term – this type is low cost and great for young healthy individuals who are healthy and may not be able to afford cash-value life insurance premiums and want to ensure their dependents are taken care of in the event of death. Your policy will cover a pre-determined "term" which is normally one, five or ten years. Your premium payment and death benefits are only during that term. After the term you will have options to continue coverage and have the opportunity to convert to a cash-value policy.
Whole Life Insurance
Whole life insurance policies cover you for life. Usually your death benefit and premium will always stay the same. It builds cash value which is tax-deferred until you decide to withdraw it or borrow against it.
* Traditional – this policy gives you a guaranteed minimum rate of return on your cash value segment.
* Interest-sensitive – provides a variable rate on your cash value portion which is comparable to an adjustable rate mortgage. This gives you the flexibility with your cheap whole life insurance policy such as increasing your death benefit without increasing your premiums depending on the economy.
* Single-premium – this is great for individuals who have a large sum of money who would like to purchase their policy up front. This cheap whole life insurance policy also accrues tax-deferred cash value.
One of the features that make whole life insurance popular is that a portion of your premium money goes around your cash value which could pay off your entire policy after a few years. Another advantage is without you make a change to your policy, you will be covered for life with no future medical exams.
Term Life Insurance
Term life insurance is great for those individuals who want to protect their family in the event of their death. Cheap term life insurance is often referred to as "pure insurance protection" because there is no cash value. It also expires at a certain time after either a set number of years or when you reach a certain age.
A medical exam will most likely be required when you are buying cheap term life insurance. Most exams cover height, weight and medical history. Sometimes test results can hinder your ability to get approved or it could potentially increase your rates, but if you are healthy you should be fine.
Universal Life Insurance
Universal life insurance combines cheap term life insurance with a tax-deferred interest accumulating savings account. This life insurance plan provides insurers with death benefit as well as incorporating savings abilities.
Universal life insurance is also known as "flexible premium adjustable life insurance," and gets this term because it is somewhat of a flexible version. Your insurance company will take a portion of your premiums and invest them in bonds, mortgages and money market funds. You earn the return on said investments which is credited to your policy tax-deferred. You usually receive a guaranteed minimum interest rate which is not dependent upon the performance of your investments so you will always get a certain minimum return on your money. When your investments do well, normally the insurance company will increase your interest rate return.
You generally have two options when setting-up your universal life insurance policy. One option will pay your death benefit out of your policies accrued cash value. This policy costs less in premiums, but it can take a while to build up sufficient benefit. The other option will pay you a face value that you agree upon in the contract plus your accumulated cash value. This option cost more in premiums, but you are guaranteed at least a specific amount of money in your death benefit. Most life insurance companies can set your policy up so you will have a no-lapse guarantee as long as you pay your minimum designated premium. The policy could stay in force to age 100 or above. Universal life provides you the flexibility to adjust your death benefit according to your needs allowing you to pay smaller or larger amounts depending on your finances.