It is rightly considered that every one should take life insurance it is a way to cover risks and to .replace your or the income of your family member in case of accident or death. To get the maximum benefit, it is advisable to purchase a minimum of five times your annual income. A lot of policies have a double indemnity clause. A double indemnity clause gives your beneficiaries double the amount of your death benefit upon sudden death such as an accident or catastrophic occurrence.
There are basically three types of life insurance policies which are term Insurance, whole life insurance, and universal life insurance. The last options come under the permanent insurance category. Each one is best depending on your individual circumstances. Let us examine the difference between these three policies.
A term life insurance is often called pure insurance because with this type of coverage a person buys a policy for a specified monthly premium with the insurance available for a set time, or term, and usually only pays out upon the death of the insured and accumulates no cash value. This is the lowest cost insurance. When you purchase this, you make a legal agreement with the insurer or insurance company declaring that you pay your insurance every month and the insurer will pay your beneficiaries upon death.
On the other hand, a whole life insurance has an invest part apart from having the life insured part. Hence, this policy has cash surrender value. This is the most expensive insurance. A universal life insurance too has cash surrender value but the cash value available can also be used to make the premium payments on the policy. Permanent insurance provides a return on investment at a later period along with a death benefit. This policy allows you to pay your premiums according to your schedule and allows payments in nearly all amounts. You can adjust the death benefit amount based on your requirements.
Although premiums are higher for permanent insurance than a term policy due to it having a long term savings plan. However, they provide many benefits along with a premium that remains the same as you get older or if your physical condition worsens. Generally, these increase in value and give the insured the ability to use funds as the investment grows.
There is also another option under the permanent insurance category, called the variable life insurance policies which have cash value as well as a death benefit. Its value is affected by how well the investments are doing. If the investments you choose do well, you receive a higher death benefit and monetary value for the policy. A few options under this scheme have a minimum death benefit that remains unchanged by the performance of your investment.
While searching for suitable insurance companies, the key factors you need to keep in mind is their rates, budget, service and stability. The rates fluctuate widely between companies due to intense competition. Hence, you need to search for three to five polices that have the right rates for you and the coverage you need. Also, an insurers financial strength and capacity to make approaching fiscal obligations are interrelated. Hence, it very important to check the companys ability to meet your claims as agreed.
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