Having seen the need for life insurance, the next step is to figure out the types of life insurance and what they mean to you. Insurance companies are very good at trying to figure out ways to make you buy more life insurance. After all, the more people they insure, the more money they make.
These are the types of insurance that I know of :
1. Term Life Insurance
This is the simplest type of life insurance. In term life insurance, premiums are paid for a certain period of time, typically 1 to 10 yrs and you can renew the insurance after the term expires.
The premium rates depend on your age and health and in that case, every time you renew it, the premiums rise. Another option is the level term insurance which locks in the premiums for a period of up to 30 yrs.
Because it’s only purpose is to provide insurance in case of death, term life insurance is very cheap compared to other insurance types. It is also very popular with well informed insured.
2. Declining Balance Term Insurance
A variation of term life insurance is the declining balance term insurance. This type of insurance is mainly based on your mortgage and its nearly always written to match the amortization of your mortgage principle.
Like term life insurance, declining balance term insurance has no cash value. The insurance company only pays off if you die before the policy’s term. You will have a constant premium during the term of your mortgage but the face value of the policy will decline every year as the mortgage principle owed continues to decline.
Once the mortgage is paid off, your policy expires since you no longer need it.
Term life insurance in all it’s variations has become very popular especially to those who believe that insurance can not be an investment vehicle. Though insurance in your investment portfolio is mandatory.
Next we shall discuss the other well known types of insurance :
- Whole life insurance
- Universal Life Insurance
- Variable Life Insurance
- Universal Variable Life Insurance
They might be the most common life insurance sold, but are they useful to your investment portfolio?
[...] that after you have decided that you need life insurance, the next step is to figure out the type of life insurance you [...]