Life Insurance Explained

Posted by Nick

June 25, 2008

Term life insurance is the least expensive type of life insurance. The premiums go to pay for the insurance and nothing more. The death benefit and the policy limit are the same, to be paid to the beneficiary in a lump sum. Term life insurance is just that. It last for only so many years and than you must get another term life insurance policy, these get more expensive the longer you live, the older you get, in other words, the more likely that you will die.

Whole life insurance costs more than term life because it not only pays for the insurance but also puts money into a savings plan. This type of insurance pays the death benefit to the beneficiary and creates a cash value account that is not taxed. Whole life insurance offers a fixed premium as long as you continue to pay. It will not increase with age like the term life insurance. As a whole life policy holder you can collect dividends or use them to pay your premiums. You can withdraw from your policy at any time.

Universal life insurance is much the same as whole life only it is more flexible. You still pay more than term life insurance because they pay into a cash value account. With univerasl life insurance, now you can change the policy values and the premiums. You can still withdraw from the policy like in whole life insurance and you can also borrow against it. As a universal life insurance policy holder you earn market rates of interest on your cash value account.

As with any type of insurance, be it life, auto, or health insurance you need to determine what your needs are and what you can afford. With higher premiums come more benefits, but what benefits do you need. I hope that the information I have given you has got you closer to choosing your life insurance policy.

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