Author: Graham McKenzie
All life insurance policies can be categorized as “term”, “whole life”, or a combination of the two. This means there are many different variations in policies.
When you have opted for the universal life insurance, you can adjust the premium and the policy to any extend you think you need.
If you want control over the financial and investing aspects of your insurance policy, your best option would be a variable life insurance policy. This policy is similar to a universal policy in that it accrues cash value, but you can choose how this cash value is invested.
Description of a Term Life Insurance Policy
A term life policy provides insurance over a specific period of time, and expires after the coverage period ends. They come in different lengths, including 5, 10, and 20 years. After the policy expires, there is no accumulated cash value, and no benefits to be paid; death benefits are only paid if you die while the policy is active. Term insurance could be described as a policy that’s designed to expire before you do.
Although premiums on term life policies tend to be low, they increase significantly as you age. Because of this, a term life policy is usually purchased when you’re young, to cover a long term. While short term renewable policies are initially less expensive, the premiums begin to make them less reasonable after middle age.
Below is an example of premium costs on an annual renewable term insurance policy. The policy in the example has a $200,000 death benefit, and the annual premiums are by age. Remember that these are only examples, to help illustrate how rates can change with age.
$300 / year age 35
Age 50: $900/year
$2,500 / year age 65
Description of a Whole Life Insurance Policy
Whole life is the most common type of life insurance. The policy remains in effect until you die or reach age 100, assuming you pay the scheduled premium. Whole life insurance is also known as ‘ordinary life’ or ‘permanent’ insurance. They feature level premiums, level face amounts, guaranteed values, and a high degree of safety. Whole life insurance has a guaranteed cash value, through which a living benefit is built. Because of this, the owner can access the cash for emergencies, or use it as a supplement to retirement income if necessary.
Whole life insurance includes both insurance and savings: whole life policies are often used in long-term financial planning. The level premiums of whole life policies also mean that the premium will never change. This gives you the peace of mind of always knowing how much your premium will be; it will not increase as you grow older.
The risk factor of whole life insurance policies is quite different from that of an auto insurance policy, by definition. With auto insurance, the insurer hopes that the policy holder will drive safely so that they never have to pay out the claim; with whole life insurance, however, the insurance company knows that they will have to pay the claim someday.
The internet has made researching and comparing different life insurance companies very easy. By doing your research online, you can ensure that you have the best policy at the best premium to meet your needs. It’s also a good idea to see how the companies you’re researching are rated with the Better Business Bureau. Also be sure to check each company’s financial stability before you sign up for a policy. If you work to get all the information you need before buying, it will be very easy to get the best possible life insurance policy online.
Graham McKenzie is the content syndication coordinator a leading South African Life Insurance and Life Cover portal. For tips on how to save on your life insurance visit our website.
