Life insurance is used to protect the financial security of the people you love most. A life insurance policy pays a cash benefit, tax free, to your beneficiaries when you die. The amount of money for which you are insured and the type of insurance you buy depends on your needs.
There are 3 types of life insurance: term, permanent and universal.
Term Life Insurance
Term life insurance provides temporary protection for temporary needs. It also has some flexibility, so you can adjust your insurance as your needs change. It provides several guarantees. You could select a Term between 10 and 40 years to take care of some temporary needs. This could cover you till your kids grow up or till some liability is paid off. Most commonly used is Term 10/20 or 30 depending upon your need and budget. Term is an excellent product to start with since it is low in cost and usually convertible into a permanent product without an evidence of insurability whenever you are financially comfortable to afford it.
Permanent life insurance is an excellent choice if you want lifelong coverage and equity in the form of a cash value over time. Permanent insurance costs are usually guaranteed when you first purchase the policy.
Some permanent insurance plans allow you to pay for a limited number of years, then never again. Imagine …you could buy insurance when you’re 40, finish paying the premiums when you’re 50, and be fully covered for the rest of your life. In contrast, term insurance is virtually always “pay as you go” and you’ll be paying premiums while you have the coverage.
Permanent life insurance premiums can be guaranteed level for life (they don’t increase as you age, even if your health changes), or they can vary depending on the permanent insurance plan you choose.
Universal Life Insurance
This type of insurance allows you to choose investments within the policy and is a very good tool for tax-sheltered growth of funds. You can choose Limited 10/ 15 or 20 year payments / payments to age 65 or life pay. You choose a guaranteed death benefit amount that will be paid to your beneficiaries when you die. You could save for your future while remaining covered at the same time.
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