Understanding the Life Insurance You Buy

Thanks to information human resource personal are beginning to share with new employees, young people are beginning to realize that owning their own life insurance is important. However, no one ever educated you on life insurance while you were in school. So, what do you look for. Complete our user friendly quotes form, and let us help you find the company that can offer you the best life insurance rates for the kind of policy that will fit your needs. In the meantime, this easy to
understand guide should help you
understand what you are looking for.

Two basic types of insurance
There are two basic categories of insurance with many variations in each. Furthermore, some companies have some unique modifications of their own.

The most common type of insurance is "cheap" Term Life. It is very inexpensive, so you can purchase high face amounts, perhaps as much as $500,000 for less than $100 per month, depending on your age. The term covers you for 10 to 20 years—the contract period. During that time, both your premium and your face value remain unchanged or "level." At the end of that time period, it can be renewed on a yearly basis or converted to a decreasing term (which you usually do NOT want). If the company offers Whole Life or Universal Life, you will be able to convert as much of the term as you can afford with no medical underwriting. If you do not convert, you will have had the 20 years of coverage, and it will simply end.

The opposite of Term Life is Whole Life. As the word implies, whole life covers you until the day you die or up to 120 years of age. In its simplest variation, you also pay as long as you live, although some companies have mechanisms for allowing you to have your insurance "paid up" after 20 years or so. As with Term, standard or "guaranteed" whole life will have a premium and a face value that will never change. Unlike Term, however, Whole life builds "cash value." That means that if you should decide you no longer need the life insurance, you can surrender your policy for the cash value. Unless you have reached age 100, the cash value will generally be less than the face value as most policies are designed to "endow" at 100 years of age. To endow simply means that the face value and cash value are equal.

Which is right for you?
Some people are uncomfortable with the notion of paying 20 years for life insurance and having nothing at the end of the term. However, the period limit should not be the deciding factor for your choice. After all, you pay your fire insurance all your life, too. No one ever complains about not getting that money back. You may never need fire insurance, but you definitely will die sooner or later.

The choice between Term or Whole Life should be based on your overall purpose for the life insurance. If you are building a hefty retirement though a 401K or IRA plan, you will have money in your senior years to pay for final expenses and may not need life insurance. Thus, you may only need it to support a family or pay off major debt in the even of pre-mature death. If so, a Term will satisfy your need.

If, on the other hand, you want a policy that will increase your assets, leave a legacy for your heirs, or provide you with additional income in your senior years, you should purchase a whole life policy. Although it will be more expensive than a Term, it will still be reasonable if purchased while you are young.

Perhaps you want it "all," both a high face value and something with a cash accumulation. You can have that too by purchasing a smaller whole life policy and a Term rider. The rider portion will mature in 20 years, after which your whole life primary policy will continue building cash. This will give you the high face value you may need in your younger years with lower cost than if you purchased the entire face value with a whole life.