Life Insurance – do you know what type of policy best suits your needs?

Many people insure their cars, their homes, their personal belongings, but in some cases do not insure their most valuable asset, their life. There are a number of different types of Life Insurance policies. In the following we will provide a short description of each one, more to allow the reader to familiarize themselves with the different products, than to provide an all encompassing detailed description of each.

Generally speaking there are two types of Life Insurance policies - Temporary (Term) and Whole Life policies.  There is a third type called Universal Life that we will touch on briefly.

Term Insurance

Under Term Insurance there are a variety of plans to choose from, allowing the individual flexibility for now and in the future.  This product gives you the assurance, that in the event of your death; your family will be taken care of.  It has the ability to provide ongoing income to maintain the lifestyle your family has been accustomed to, pay off any existing mortgages, as well as provide for your children’s education.

In analyzing your insurance needs, we usually provide the following scenarios  – if you are young and single you in all likelihood would not require a great deal of life insurance.  If on the other hand you are married without children and both of you are working, then you probably require enough to cover immediate expenses associated with your untimely passing, and possibly money to pay off any existing mortgage.  However, if you are married with children life insurance becomes almost mandatory, particularly if your family is dependent on your income.

Temporary or what we more commonly call Term Life Insurance has three main components – the first is the amount of death penalty the policy will pay – the second is the price your pay (premium) – with the third being the length of term you select (i.e. 5,10, 20 year term).  In return for payment of the premiums the insurance company agrees to pay you the face amount of the policy in the event of the death of the policyholder.  Term insurance gets its name from the fact that it covers you for a specific term, or period of time.

Whole Life Insurance

Whole Life insurance is so called as it provides the insured with permanent or insurance for their “whole life”.   The face amount of the policy is provided against the payment of a level premium.  Whole life provides you with protection, while at the same time it builds cash value and does not have a specific term or expiry date.

Whole Life insurance is generally more costly than term insurance.  Part of the premium you pay to the insurance company can be invested in stocks, bonds or other assets that can appreciate in value over time. There are different options available under Whole Life Plans, which we would be pleased to discuss with you.

Universal Life Insurance

Some industry people suggest Universal Life Insurance provides you with the most flexibility of any insurance products.  In a nutshell Universal Life Insurance is a variation of Whole Life Insurance.  You can tailor your UL policy and maintain the flexibility to change the policy in subsequent years. This flexibility allows you, after payment of your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums.  You can also increase or decrease the amount of the death benefit more easily than under traditional life policies.

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