Life Insurance 101

Life insurance is one of the simplest and most powerful forms of financial protection for you and your family. However, choosing the right type and amount of insurance can be difficult and confusing. Life Insurance is a long term commitment. The point of life insurance is to replace income that would be lost if the policyholder dies.

You must decide which for of life insurance is best suited for your needs. Term life, whole life, universal life, permanent life and employer life insurance are among the various types of life insurance you will need to investigate. The internet is one of the best places to search for types and quotes of insurance. Be sure to compare same type insurance when getting quotes as not all insurances are equal.

Term life insurance is death protection for a term of one or more years. Term life insurance is generally the cheapest life insurance available. Whole Life Insurance is the most common type of permanent insurance. Joint term life insurance is a program which covers typically married couples to protect their children in case of death of either or both parents. Whole life insurance is sometimes bought as an investment. The premium for whole life insurance is initially greater than that required for term insurance; however, the premium will not increase like term insurance will and cash value will accrue. Group life insurance is a form of term life that is sold to companies to cover their employees. This type of insurance generally will not cover the needs of a family if the employee dies while working. Universal Life Insurance is a flexible-premium, adjustable benefit life insurance policy that accumulates account value. Decreasing term life insurance is very popular with home owners and mortgage companies mainly to cover the remainder of the mortgage owed.

There are two basic types of life insurance: term and permanent. The premiums for term insurance are usually the lowest among the different types of life insurance, but will increase in cost with the age of the insured. Unlike other types, term life insurance has no cash value, savings or investment elements that procure administrative costs and require higher premiums. Certain types of whole life insurance are touted as vehicles for saving or investing money for retirement, commonly called cash-value policies. Choosing the type and amount of insurance needed is a very personal decision.

Because changes in your life will affect your coverage needs, you should review your life insurance policy often. Empty-nesters, retirees need to reconsider insurance coverage as they age. Remember, the purpose of life insurance is to replace your income should you die. Life insurance is therefore a gift that you give to someone else. Like savings, investments, and homeownership, life insurance is an essential part of financial planning. That's what life insurance is for, planning for what you can't predict. Proper life insurance is critical to your loved ones financial well being.

By Will Jones