Basics of Life Insurance

Everyone purchase insurance to make sure that they are financially safe and secure. People buy life insurance to give security to their loved ones in crisis time. And these days it is a necessity for every family. So it is necessary to know the basics of this insurance. You will find different types of insurances from different companies based on your requirements, and price of the policy.

Usually life insurance presents coverage for specific time period like 20 years, 15 years, or 10 years. A whole life policy also known as permanent insurance gives whole life coverage to you. The first step is to analyze your need. First you have to decide what types of coverage you actually need for you and your family. And then you have to consider your financial situation because it is not a wise decision to purchase insurance with very high premium which you would not be able to give.

You will usually find four types of life insurance in the market. They are – term life policy, whole life policy, variable life policy and universal life policy. In term life policy you will get death protection only without “cash values” or side funds. In whole life policy, it has “cash value” which is also known as surrender value. It is the cash offered to the owner of the policy after contract cancellation.

If you want a cheap policy then you should go for term life policy. Here in term life policy, your premium amount will increase with your age. If you want to have same premium for entire period of the policy, you have to select “level term insurance”. In “level term insurance”, your premium will remain same but with time you will start losing the facilities of death benefit. It is good if someone wants to cover only particular debt which decreases, like a business loan or mortgage.

If you need more than just death benefit from your insurance policy, then you should go for whole life policy. And after the death, along with the death benefit you will get either cash value or return of premium which depends on your choice. Universal life policy is more flexible than term life or whole life policy. Here you can increase or reduce your death benefit amount after paying the initial premium. To maintain sufficient and decent funding, you should manage these types of policies. These days, some new universal life policies are almost same as term life policy.

Variable life policy provides side fund along with death benefit which operates like investment account. The insurance company will invest your premium and will offer you some choices where the money of yours will be invested. And obviously, the return is not guaranteed. Before purchasing life insurance, you must decide what you require from it. Then you can go to purchase any policy that will cover your clauses. But you should compare all the available policies before buying the right one for you and your family. To know the details you can either search on the internet or you can consult with any insurance agent.