Life Insurance Policy
Taking out a life insurance policy is an easy way to provide your loved ones with financial security following your death. There are several popular types of life insurance available today; the most common of which are whole life and term life insurance policies.
A whole life insurance policy requires you to pay your premiums from the day you take out the policy until the day you die. If for any reason you stop paying the premiums, the policy ends and you get none of the money back that you have paid in. For this reason it is important that you choose a policy to suits your needs and that has premiums you can easily afford to continue paying.
Your whole life policy will have an insured amount on it, $150,000 for example, and it is this figure that determines the size of your monthly premiums. It is also this figure that your insurance life policy will pay out on your death. This figure is generally tax free and if arranged properly it can also be free from estate tax.
A whole life insurance policy also allows you to build cash value over the years. This can then be borrowed against for a variety of reasons should the need arise. By doing this you will decrease the amount your loved ones receive following your death though.
A term life insurance policy differs from a whole life policy in that it only runs for a specified number of years, as in the term of the policy. This means that the policy only pays out the death benefit if you die during the time period that it covers, for example 25 or 30 years.
This type of life insurance is aimed at people who have major financial commitments, such as a mortgage, that need to be paid off in full in the event of death. So for example you could get a life insurance policy term that runs for the same number of years as your mortgage. The insured amount would be, at the very least, equal to the amount owed on the mortgage so that the debt could be fully paid in the event of your premature death. Again the premiums have to be paid for the entire term of the policy. Saying that, the premiums on a term policy are often lower than those on a similar whole life policy.
Life insurance policies can be tailored to suit either your current needs or the needs of your family following your death. Some policies run for an agreed number of years (term) while others continue for the remainder of your life (whole life). Either way, a life insurance policy provides financial security for those you leave behind.