Life insurance is the same for all people throughout the world, it offers protection for your loved ones should you happen to die and leave behind debt that would financially hurt them. It can also replace you financially. Although you may not be there physically to be able to give advice or help in bringing up your family, you can ensure that enough money will be available to make certain your children will reach adulthood without suffering financially. The alternative is often destitution for many.
Choose the Right Company First
However, to enjoy these benefits it is important that you make sure the company you entrust with caring for your family after you have gone is stable and able to do so. Life insurance is a long term agreement for both the insurance company as well as yourself. When you take out your policy you will have to acknowledge the fact that you will have to keep paying the premiums for many long years throughout your lifetime. The life insurance company in turn will have to be able to honour its agreement with you and pay your beneficiaries the agreed amount of insurance if you should die while your policy is active.
This is why it is often safer to choose a company that has a long history of success and is well regarded by its policy holders. Many companies might appear to be newcomers to the life insurance scene but in reality have been subjected to a take over or merger in the market place and have simply had a name change. You can find all this information on the company’s website, it is therefore advisable to do sufficient research in order to know exactly who you are making such an important agreement with.
Types of Policies
Once you have settled on which life insurance company you would like to do business with you will find there are two main types of policies being offered:
1 – Term Life Insurance
Term insurance is the most popular insurance these days as you can buy quite large amounts of cover for very low cost. Its drawback, however, is that it can only be taken out for a specific period of time. Once this time has expired so does the cover, and if you have remained alive you will have forfeited all the premium payments you have made.
It can be looked at as being much the same as any other insurance you might purchase, such as that for cover on your house, contents or motor car. Term insurance also gets dearer to buy as you get older because of the greater risk the life insurance company is carrying. When taking out term life insurance you will need to make sure there is a clause in the terms and conditions which guarantees renewability when the policy expires. Although you will most likely have to pay an increased premium, you will still be insurable, as nobody knows what their physical condition will be in the years to come.
2 – Permanent Life Insurance
This type of life insurance comes in various forms. It can be as whole of life assurance, universal life insurance, or variable universal life insurance. All these policies cover you for your whole life at the same cost as when you purchased it. It doesn’t don’t have a specific expiry date as does term life insurance.
It is worth considering taking out a basic amount of permanent life insurance cover as a form of retirement protection for when you get older, and take out larger amounts of term insurance to give you extra cover for the periods in your life when you are over exposed financially, such as when you marry, start a family and buy a house.
Permanent life insurance is more expensive than term insurance because at some stage the life insurance company will have to pay you out, either because of your death or when you cash it in. Your premium pays for a life insurance policy as well as an investment component. At any time during the life of your permanent life insurance policy you will be able to cash it in to retrieve the investment portion. This will, of course, terminate the insurance cover you have. You can also simply borrow from the investment portion rather than cashing in the whole amount, and this will allow the policy to continue giving you the cover you require.
Amount of Cover
The amount of cover you require will depend on your lifestyle, the size of your family and the amount of debt you carry. You will need to take into account such things as the cost of a funeral and the day to day costs of managing your family needs, including your mortgage, business or other debts. When you know these costs you can buy enough life insurance to ensure your family will be protected. If you were no longer there to care for them financially, at least you will have paid off the mortgage and all other debts. You will also have left enough money that could be invested so that the interest will bring in sufficient money to pay your family’s everyday ongoing living expenses.
Life insurance stands alone as the only way a person can ensure protection against risk while at the same time incorporate a savings plan for the future as well as receive tax benefits on the way.
This article was written by Will from Life Insurance Finder. Visit Life Insurance Finder to compare life insurance quotes.