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It can be used for family protection, savings, business protection, funding a trust, and others. Life insurance, Home or Direct auto Insurance under 100 coverage is an extremely versatile policy. Let’s take this one aspect at a time.
Types of life insurance include
- whole life
- universal life
- term life
You could divide them into two categories: term and permanent.
Whole life insurance
It is the original type of permanent coverage. It is a policy that promises a certain amount of benefit to a given beneficiary at a constant premium. It cannot be canceled unless you cancel it by not paying or by the directive. It normally runs until you are age 99 and then you get all of your money back. It has a savings component that compounds the invested money at a guaranteed (although not very high) rate.
It is useful when you need a guaranteed premium over its lifetime for a guaranteed benefit, such as funding a trust, which will someday pay out the benefits with known tax consequences to pay inheritance taxes, gifts, build a hospital wing, and other such uses.
Term life insurance
It is pretty much the direct opposite. The term is selected, as is the benefit amount based upon one’s need for family protection while a family is growing, or a home is being paid off. The coverage ends when the term ends. More accurately, when the term ends, the premium goes up too high to keep the policy in force. You get forced out of the policy.
With a pure term policy, the rate begins low and increases as you age, in response to mortality rates (the chance that you will die at any given age.) The most term currently written is a level term, where the premiums are averaged over the term years, based on current mortality rates for each age. That way the premium remains level until the term ends and it all goes crazy. Typical terms are 10, 20, and 30 years. Premiums vary with the amount of coverage being purchased. $250,000 of coverage is one-fourth of the cost of $1,000,00 of coverage unless there are premium breaks for larger amounts.
Generally speaking, term premiums cost a fraction of the cost of whole life policy premiums, because with whole life, the insurance company is sure you will die, and they will have to pay out on the policy. Not necessarily so on a term life policy which may cancel before you die. You might say they are betting you will live, and they don’t have to payout.
Universal Life policies
These policies are a sort of hybrid. The premium inside the policy increases as with a pure term policy. The rates are calculated based on a certain number of years that you might keep the policy, and there is also a savings component with a guaranteed rate and a projected rate. This is used in the calculation to project how much money needs to go into the savings portion in order to offset the pure premium for any given number of years.
This type of policy comes with illustrations of both projections, and much care should be used before buying this type of policy. It is easy for agents to want to create more favorable projections in order to make a sale. That said, if done correctly, this is the most versatile type of permanent insurance. The savings portion can even be an investment product if sold by a properly licensed investment consultant.
Universal Car Insurance
Compare several Life and Car insurances quotes from Aflac Insurance and get the policy that best suits your life and car insurance needs.
