Why People Buy Life Insurance and The Three Basic Categories.
People buy life insurance because the odds of your house being destroyed by fire are considerably less than the possibility of your family losing your home through the untimely or total disability of the breadwinner, because without your income your would still have to make your monthly mortgage payments. Think about it.
How long would it take for your to adjust to life without you? Two years… five years… maybe ten? And how long could your present savings and other sustain them? To build adequate reserves to ease them over this period of adjustment could be costly, and could make you forfeit today’s pleasures for tomorrow’s security.
Life has three basic categories: term, permanent, and universal. Term Life insures your life for a set amount of years 10, 20, 25, or 30 years. If you die before the end of the term, your beneficiaries receive a lump sum equal to the face amount of the policy you purchased. Term life offers the greatest amount of protection for the lowest cost, also there is coverage that will return all your premiums back to you tax free if you do not use your coverage or out live your policy. Unlike other types of , term policies have no investment component or increasing cash value just the essential promise of a payout if you die while the policy is in force. Term policies give you the utmost budget flexibility should your needs change over time.
Whole Life Insurance is permanent insurance, covering you for your entire life, no matter how long you live. When you die, your beneficiaries receive a lump sum equal to the amount of the policy you purchased. A whole life policy also earns interest and builds tax-deferred cash values. Typically more expensive than other types of policies, whole life guarantees your will receive a payout when you die, while building up savings you can use on a permanent or short-term basis, also you can take loans out against the policy.
Universal Life is a flexible premium adjustable benefit, permanent life policy that accumulates account value. It can be complicated and could be more expensive to purchase than other types of life . The flexibility of this policy allows you to change the amount of premium payments as your needs for change as long as your policy is funded, also you can skip payments from time to time.
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