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Life Insurance

Importance of life insurance
Life insurance is intended to protect your family from financial hardship in the event of your death. It is not uncommon for people to dismiss this thought, and not carry any type of life insurance. The question you should ask yourself is, "is it fair to your family to leave them without any security?"

An untimely death can leave your family in debt with no way to meet their financial needs. It is, therefore, recommended that you plan for their protection.

Types of life insurance

Term life and permanent life insurance, are the two basic kinds of life insurance. Both types, have advantages and disadvantages.

Term Life

Term life insurance, is one method of life insurance available. This insurance is issued in terms. An individual is only covered if their death occurs during the term of coverage. Each term can be from 1-30 years long, and generally can be renewed.

Pros
Term life insurance policies usually have low initial premiums. Because the premiums are low an individual can usually get higher death benefits.

Cons
Term life insurance premiums increase as you get older. An individual's renewal can be denied if they become too old, or if they no longer meet specific health criteria. Another disadvantage of term life insurance, is that it has no cash value. Unlike Permanent insurance, you can not borrow against it or surrender it for cash. (For more information on cash value, read the section on permanent insurance).


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Permanent Insurance

Permanent life insurance comes in many forms.

Ordinary/Whole Life
Whole life insurance is the most commonly used life insurance policy available. It generally has consistent premiums that are paid throughout the life of the policy.

Variable Life
This type of policy is based on a portfolio of an investment. Its death benefits can fluctuate depending on the performance of the investment. Variable life insurance carries a high risk, and should be carefully thought through.

Universal Life
This type of life insurance has a very flexible premium payment structure. The insured individual can usually pay their premiums at any time. The payment amount is also flexible, within a pre-determined range. The death benefits of the universal life coverage, can be increased, or decreased with ease. Keep in mind that an individual's health condition can affect the flexibility of the death benefits.

Adjustable Life
Adjustable life policies are considered adjustable, because the premiums are adjusted to match current interest rates. The readjustment periods are usually 5 or 10 years long.

Pros
The advantages of a permanent life insurance, out weigh the disadvantages. An individual's coverage is guaranteed for life as long as all premiums are paid. The insurance policy has a cash value that increases. The policy can be surrendered for some or all of its cash value and it can be borrowed against.

Cons
The biggest con with permanent life insurance, is its premiums. The premiums are significantly higher than term life. Because of the premiums, you might not be able to get death benefits that are as large as a term life policy.

Now that you know a bit more about life insurance, try getting a free quote to see how much it would cost you to be prepared for the worst. There are services available that allow you to get quotes from local, and national life insurance companies without having to make a commitment.


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