Types of life insurance

There are two main types of life insurance policies available in today’s life insurance market. They are namely, term life and whole life. Each has its own unique purpose and fills a particular need in the market place. Knowing which is the best for your situation is the key to maximizing your life insurance dollar.

Term life insurance policies. A term life policy gives you protection for a specified time, usually until the age of seventy. Almost anyone can apply for a term life insurance policy. This policy is best suited and is meant for young adults. It is used to take of your short-term needs. These policies have a range of between 1 to 100 years. So if you decide to choose a two-year term then your coverage will increase over two years.

The premium on term life policies is used to purchase risk coverage after expenses are deducted from the premium. In spite of this, the annual premium has a low initial out of pocket expense.

The drawbacks of term life insurance are:
• Some of these policies may have re-entry provisions, such as requalifying after a set time period medically in order to keep your premium at a low level.
• Premiums increase at regular interval over time.
• Persons over the age of fifty-five will find it much more expensive to acquire a policy.

Whole life insurance policies. This kind of policy gives you coverage for your entire life and guarantees you a death benefit. There are some policies that will also pay you dividends. These dividends can be used to purchase more coverage. A portion of the premiums is normally used to pay, the cost of the insurance risk and part pays your insurers costs, and the rest goes into a reserve fund known as a cash value.

In the more popular whole life policy only one life is insured, and pays a death benefit to a beneficiary upon his/her death.

The drawbacks of whole life policies are:
• Premiums are higher than those for a term policy. Because some of the money goes towards cash value.
• They do not all pay dividends and even if they do it are not guaranteed.

When planning for life insurance it should relate to whatever your objectives are at certain time sin your life. So you are advised to speak to an insurance agent to get some guidance.

source: http://www.digimok.com/types-life-insurance