It is difficult to find which is the most suitable and affordable insurance to purchase from the numerous insurance policies available. Life insurance provides a source of income for the family to cope with the loss of income in the event of insurer’s death. This is a great help in taking care of the expenses and in paying of bills and final expenses. You have to understand how the insurance works for your benefit.
Life Insurance- Evaluate The Options Available
Basically, Term and Permanent life insurance are on sale in the market. Term life insurance has a specific premium for specified period and does not accumulate cash value. If insurance is purchased at a younger age you end up paying lesser premium. Permanent life insurance is slightly different in that it remains active until maturity or the insurer fails to pay his/her premiums in time. However, this type of insurance has the disadvantage of being expensive because of reduction in risk amount due to building of cash value. There are three types of permanent life insurances – Whole life, universal life and endowment.
Whole life insurance has a number of advantages. There is a guaranteed cash value and death benefit. Annual premiums are fixed without any reduction in mortality and expense charges. You can opt for increasing the death benefits by paying additional premium or using dividends. The disadvantage with such policies is that the premium rate cannot be changed. The beneficiary receives death benefits only and not the cash value.
Universal life insurance tries to overcome the disadvantages of whole life insurance. The premiums are lower, flexible, the internal rate of return is high due to volatile nature of the market and guaranteed interest as fixed by the company is credited to the policy. It also provides cash account which keeps swelling as premiums are paid. The biggest advantage is that provides an option to opt for payment of face amount or face amount plus cash amount at the time of death. The disadvantage of the policy is that it lapses if sufficient premiums are not paid, the cash values are not guaranteed, mortality and administrative charges are reduced from the cash value.
Endowment life insurance is more expensive than whole and universal life insurances because of shorter period of payment of premiums. This type of policy matures before the normal endowment age.
A permanent policy cannot be cancelled by the insurer except when insurance is purchased by fraudulent means by the insurer. The time limit for cancellation is within a period of two years.
An expert on life insurance can guide you through the most affordable insurance plan that fit your needs.