At Naples Life Insurance & Annuity Advisors, we love to help our clients by not only being there for them, and guiding them toward the best option for them, but by also educating them so that they feel they are making a knowledgeable decision. We understand that for some of our clients anything associated with financial planning and insurance feels overwhelming, but we are here for you and will help you through the process, so that you can have financial planning that’s right for you! Here are the basics of what you need to know about life insurance:
Basic Types of Life Insurance
First thing you need to know is that there are two basic types of life insurance: Term life insurance and permanent life insurance.
Term life insurance is the most basic type of life insurances. Term life insurance is usually the cheapest life insurance, because the purpose of this life insurance is for death benefit protection only: There are no cash value build ups. When you purchase term life insurance, you will have the option for your coverage to last for a specific length of time with a one year renewal option, lengths of time that are generally available are 10 years, 15 years, 20 years, 25 years, 30 years and sometimes longer.
Level Term and Decreasing Term
Under the term life insurance umbrella are level term and decreasing term. Level term, one of the most popular ensures that the benefit stays the same for the duration of the policy. Decreasing term means that the benefit of this insurance drops each year of the policy’s duration. One of the purposes of decreasing life insurance is to help cover the cost of a mortgage: Because every year the amount needed to pay for the mortgage decreases so does the decreasing term insurance. There are also some term insurance plans that increase over time.
The difference between term and permanent life insurance is that permanent life insurance offers both death benefit and cash value. Also, permanent life insurance is just as the name suggests: It is life insurance that is intended to last for the entirety of the insured’s remaining lifetime.
Whole Life Insurance
Whole life insurance is as it suggests: Whole life insurance is for the insured’s whole life with a premium that stays the same for their entire life. This policy is usually purchased by those who are younger. Another aspect of whole life insurance to consider is that the cash value is not taxed until it is withdrawn, allowing it to grow exponentially.
Universal Life Insurance
Like whole life insurance, universal life insurance also provides the death benefit and cash value. The difference between these two types of life insurance is that the insured is allowed to choose how much of the premium goes towards death benefit and the cash benefit. Because the insured chooses how to use the premium, this type of life insurance can be used to pay off debt and whatever expense the insured desires.
Variable Life Insurance
Variable life insurance has the same characteristics of other types of permanent life insurance: Variable plans offer a death benefit and cash component. One difference between variable life insurance and others is that the policyholder can use the funds to invest in other opportunities, such as equities. The advantage of this is that the policyholder can make investments that will grow their amount of money greatly. With the potential for big returns on investments, there is also risk, for as the market goes up and down, so does the death benefit amount.
Other Types of Life Insurance
Survivorship Life Insurance
One of the perks of this type of life insurance is that it can be less expensive than purchasing two life insurance policies, for this insurance is set up to cover two people. Usually, how this type of insurance works is that when the first person insured dies, money in the policy is dispersed. One aspect of this type of life insurance policy is that the premium can be higher than other life insurance policies, but in some cases this outweighs the cost of, as stated before, two separate policies.
Final Expense Life Insurance
A popular insurance policy purchase by those who are more advanced in years (ages 50 to 85) is final expense life insurance. The purpose of this life insurance is to pay for the expenses of the insured’s death: this life insurance covers the expense of burial, flowers, headstone, funeral, etc. This type of life insurance can be a great way to express how much you care about your loved ones and to help ease the pain of your passing, by alleviating the stress of paying for the expenses of your death.
No Medical Life Insurance
For other types of life insurance, a medical exam is required before a life insurance policy can be underwritten. For this type of medical insurance, as the name suggests, no medical exam is required. This type of insurance can be a great option for those with medical issues that would normally deny them insurance. Because no medical exam is required, usually you can acquire this policy within a few days.
Life Insurance and You
Now that you know some of the basic types of life insurance, you may either feel more or less overwhelmed with the prospect of buying life insurance. Talk with a financial planning advisor such as Chris T. Christensen at Naples Life Insurance & Annuity Advisors to determine what life insurance policy is right for you! He can help you understand the details of what type of insurance you should choose.
As you consider whether to buy life insurance or what kind to buy, you should keep in mind the benefits of insurance. Life insurance give you greater peace of mind because you are prepared for the future; gives you an opportunity for financial growth, and to practice positive financial planning behaviors. To read more about the these benefits, go here!
Are You Ready to Invest in Your Future?
If you are interested in life insurance or simply want to know more about life insurance, annuities, and financial planning, contact Naples Life Insurance & Annuity Advisors: Our advisor is a Top Rated Local® financial advisor and wants to help you have the best financial present and future. Contact us today to get more information and learn more about the services that we offer!
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