Life Insurance


LIFE Insurance Policy

Most people know that life insurance policies pay cash to a beneficiary after the policyholder dies. These policies are good for many reasons. People who have minor children can have peace of mind knowing that if they die prematurely there will be money to provide for their spouse and children. Money from many of these policies pays for funeral expenses.

Generally, insurance agents offer two types of this kind of insurance: term life and whole life or permanent life. Term life policies are less expensive than whole life policies. The buyer chooses a length of term for coverage. Typically, this term is 10, 15, 20 or 30 years. Once the term of the policy ends, the policyholder loses coverage. However, some insurers policyholders to extend the policy at a higher cost. A common age limit for term insurance is 95.

Whole life policies insure policyholders for the length of their lives as long as they pay the premiums. Unlike term life policies, policyholders can withdraw money or take out a loan based on the accumulated value of the policy. These actions, of course, reduce the death benefit and cash value of the policy.

The first type of whole life policy is traditional whole life. The death payout and the premium stay constant unless the policyholder withdraws money or takes out a loan on the policy. Another type of whole life policy is universal life. The insurer pays the policyholder a fixed interest rate comparable to that on money market funds. Though this interest rate can never go below a guaranteed minimum rate, the cash value, premium and death benefit can be changed after the policyholder has paid a minimum amount in premiums.