Life Insurance Terminology Demystified
Buying life insurance is something many people do, however, in order to purchase wisely, you need to understand what all the life insurance terminology means. Terms like; whole life, term insurance and universal are essential to know before you purchase any policies for yourself or your family
Did you know that roughly 76% of all policy owners don’t even know the basics about their policy? This is due to the fact that they purchase a plan through their employer, but that is still not reason not to know the basics of the policy in which you pay for.
Below you will see the terminology explained for some of the most common policies available. Keep in mind that every company will have different policies and features that go along with them but just know that the terminology and the definitions of them will be the same from company to company.
- Whole Life – This policy is easy to understand as it iremains in effect for the whole life of the policy owner. A whole life policy is also referred to as permanent life insurance as it is permanently part of your life. What many people like is the fact that premiums stay the same throughout the life of the policy and you are guaranteed a payment upon death.
Who is whole life insurance best for?
This type of plan is recommended to everybody that purchases life insurance as you will own it for the duration of your life and will be rewarded by all the policy benefits. Whole life is good to get early on in life as the younger you are the cheaper it will be.
- Term Life – The purpose of this policy is to pay a specified amount upon death during the term of the policy only. Term life is the simplest of the life insurance policies. Term life is a policy in which you are simply renting the policy for a specific period, you do not necessarily own the policy. In most cases term life insurance will be purchased in blocks of 1 year, 10 years and 20 years.
Who is term life insurance best for?
This particular policy is best for younger parents, anybody with debt and people who want protection while still watching what they spend. In most cases term life is best for younger adults who have a small need for protection but don’t have the money to comfortably pay for a whole life policy.
- Universal Life – This is a type of permanent life insurance policy but in addition to the policy it will use additional premiums to increase the cash value of the policy. There are several types of universal life policies and the most common one is a variable policy. This in essence is just a universal life policy that is tied to the stock market through mutual funds in order to determine the interest rate on the additional premiums.
Who is universal life insurance best for?
This plan is targeted toward people who want to take a risk on their policy and want to use it as a type of savings account. Now, this is not the best place to put money for retirement, however, it does act as a retirement option since you can take money out of the policy at any given time.
Many people decide to buy life insurance without really thinking about which policy would work best for them. It is important that you get a policy that will not only benefit you in the short term but the long term as well.
Life insurance companies are available to purchase peace of mind for you and your family in the event of an untimely death. However, not all organizations and policies are created equal. Let us help you find the best fit for you and your loved ones.