Friday, April 1, 2011

Term Life Insurance - The Pros and Cons :

Life insurance is a tool that many people use to provide a healthier or more robust estate for their beneficiaries. There are a number of different types of life policies available but they all work in basically the same way. An individual chooses how much money they want to leave behind to their family or loved ones and then pays monthly premiums on a policy until they pass away. At the time of the policyholder's death, the insurance company pays the beneficiaries the amount of death benefits due to them. The vast majority of life insurance works just like this, but there are a few notable exceptions.

Single premium life policies do not require an individual to make a monthly premium payment. These types of policies are paid in full at the outset. An individual can choose to pay just about any amount to open this type of life insurance policy with the caveat being that most insurance companies require a minimum payment of at least $5000. Just because a person has life coverage does not mean that their beneficiaries are guaranteed to get death benefits if that person passes away. In the case of a term life insurance policy, if the individual outlives the term and does not renew the policy there will be no benefits available.

The type of insurance that most financial planners would recommend to their clients is often referred to as permanent life policy. This type of insurance is best suited for individuals that are still fairly young and have the luxury of allowing the policy to mature over time. The typical permanent life coverage takes it least 10 years to fully mature. As long as the policyholder makes their regular premiums, which keeps the account active, they do not need to worry about having their policy expire or seeing their premiums increase.

Not all life insurance policies are designed for the exact same purpose. Certain types of life insurance, like survivorship life coverage, are designed to serve a specific function. A survivorship life policy is purchased by a couple who are usually wealthy as a way of covering any estate taxes that may be due at the time of the final spouse's passing. There is no one size fits all approach to life coverage. Each person must carefully consider their finances, budget, and whether or not there are people depending on them in order to determine exactly which type of life insurance is best and how large of a policy to purchase.
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Source : articlebase

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