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Money-Management Articles >> Life Insurance That Suits Your Life
By Ivon T. Hughes By
understanding the basics of life insurance coverage, you are able to
determine what type of policy works best for you and your family.
Who Needs Life Insurance?
Life insurance provides money to your beneficiaries in the event of your
untimely death so they can maintain their standard of living. If you don't
have children, you can designate another family member such as a niece or
nephew as the beneficiary, or you can donate the money to charity. A
policy can even be taken out just to cover burial expenses.
Different Types of Life Insurance
Term Life Insurance: Covers a designated period of time. Once that period
is over, the insurance lapses. As you age, the cost of renewal rises. If
you want the longest period of coverage, you need a term life insurance
policy to age 100.
Whole Life Insurance: Covers your entire lifetime and has a cash value.
Premiums never increase. You can borrow against the cash value of the
policy. If you stop making payments midway through the policy, the cash
value pays the premiums until exhaustion. This is up to 5 times more
expensive than a term life insurance policy.
Universal Life Insurance: Premiums can be adjusted by the owner, which may
change the face value of the policy. You can borrow against the cash
value. Basically, it is a term life insurance policy with an investment
portion such as a whole life insurance policy. In a whole life insurance
policy, you do not choose an investment, that is done by the insurance
company. With a Universal Life insurance policy however, you may, if you
wish, choose the investments for the investment portion of your premium.
Two different reasons for Life Insurance: If you don't have a lot of money
to buy a good pension, a good term life insurance policy may be able to
help. If your partner dies, these funds can form a capital amount to buy a
pension.
Alternatively, you can insure the life of a healthy parent. In the normal
course of events, your parent will predecease you, thus providing you with
the necessary pension funds. Thus you have solved a problem in which your
parent has gladly helped.
This article was added on: April 16, 2006.
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