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Overview of Life Insurance Policies

Life insurance is just a simple way to ensure the family’s financial security after the death. There are many kinds of insurance policies available and choosing the right policy depends on various personal factors.

Types of Life Insurance Policies

Term Life Insurance- This type of insurance is simple and inexpensive. There is a fixed term for the coverage usually 1-30 years and can be renewed. If you die during the policy term, the beneficiary will be given some fixed amount of money. When you are young, the premiums are low and gradually increase when you get older. There is no cash accumulation with term life insurance policies.

Permanent Life Insurance- This life insurance policy gives lifetime protection or in some cases, up to certain age at which point, cash value is paid by the insurer to the policy owner. This policy builds the cash value and you can borrow the money against the policy or withdraw to meet some goals. Favourable tax treatment is given to permanent life insurance policy.

Evaluating Various Life Insurance Policies

It is easy to compare term policies of different companies. A certain amount is being paid by you for defined death benefit and you are paying for certain number of years. All you need to do is to compare the premiums and it will give you the most cost efficient life insurance policy.

In case of whole life policies, even if the premiums are identical, and other stated death benefits are quite same, other options can vary significantly. Certain guarantees, assumptions and projections are used by insurance companies to value their policies. Cost and coverage could greatly be affected by these variables. Some of these are-

Cash Value Projections- It shows if in later years, cash value of the policy will be enough to keep it in force.

Surrender Charges- This is the amount charged by the company in case of termination of policy.

Dividends- You need to ensure that the projected dividends of the company are in tune with what it has been paying in the past.

Mortality assumptions- A unique statistical analysis is done by each insurance company to determine risk of individual’s death while policy is still in place. This is the main reason for cost variation.

When choosing a life insurance policy, you need to find out about financial stability of the company. If the company’s financial stability is a question, they will price their policies cheaper. It is also possible to buy the life insurance policy online. There are many independent companies who provide the ratings for insurance companies. Some of the well-known companies providing information are Moody’s Investors Service, A.M. Best Company and Standard and Poor’s Corporation.