Permanent Insurance Benefits and Types
Life insurance is something that every person should have. It ensures that in the event of premature death, the loved ones a person leaves behind are taken care of financially. Funeral costs and the loss of a second income can devastate a family without any coverage. A life insurance policy can help lift this burden and provide a secure financial future for survivors of the deceased individual.
There are two general forms of life insurance: term insurance and permanent insurance. Term life insurance is only valid for a specified period of time, which may be as little as five years or as long as thirty years. Permanent insurance, on the other hand, is valid for the rest of the person’s life. It also builds cash value over time, which may be borrowed against if need be. While this type of insurance is typically more expensive than term life insurance policies, it does come with quite a few advantages.
Types of Permanent Life Insurance
Today, there are many different types of permanent life insurance and they each have their own benefits. This allows insurance buyers to easily find a policy that fits their lifestyle and needs. Three of the more popular policies are: whole, universal and variable.
Providing the policy holder continues to pay their monthly premium, a whole life insurance policy offers a lifetime of coverage. In the event of the policy holder’s death, the policy’s beneficiaries are guaranteed to receive a death benefit. The premium on a whole life insurance policy is guaranteed to never increase and the policy holder is also guaranteed a rate of return on the cash value of the policy.
A universal life insurance policy separates the investment portion of the policy from the death benefit portion. Any funds that are allotted for investment will be put into money market accounts, stocks and bonds. The investment money is put towards the death benefit. The policy holder will receive a minimum death benefit regardless of how well their investments perform. Beneficiaries will receive more money should the investments do well.
Variable policies are similar to universal policies, but there is one key difference between the two. Policy holders with a variable plan are given the opportunity to choose where their investment money goes. They are typically given a portfolio of investments to choose from. This type of policy can also be surrendered at any time and the policy holder will be given its cash value. However, the death benefit and cash value of the policy are not guaranteed. If the investments do well, the policy holder may wind up receiving more than they anticipated. Should the investments do poorly, however, the policy holder will need to put more money into the policy in order to keep it in good standing. It is a risky choice and typically costs more than other permanent policies.
Permanent insurance policies have many advantages that other types of life insurance cannot offer. Perhaps what makes this type of insurance so appealing is the fact that it builds cash value. Policy holders have the option to borrow money against their policy in a time of need and are provided with coverage for their entire life.