Archive for September, 2008

Understanding The Different Types Of Life Insurance

There are many companies providing life insurance services; you can get most of the information you need from insurance brokers, financial advisers who work for insurance companies, employees of insurance companies, and other sources. Much of the information you receive, however, will be in general terms – or will focus more on ‘sales talk’ aimed at getting you to purchase life insurance from the person you are talking to.

The truth is that there are many different types of life insurance available – not just the ‘cradle to grave’ coverage offered by insurance sales people. Here are three of them.

Level Term Life Insurance

This is a type of coverage with a specific face amount (the death benefit) over a set number of years with the premium generally kept constant throughout the policy’s term. The term of insurance is fixed; it can be 1, 5, 10, 15, 20, and even 30 years.

The typical aim of this kind of insurance is providing the family some financial protection in case of the insured’s death within the term– ensuring that there are enough monies to support the survivor and any dependent children. It may also be designed to cover payments for loans or mortgages, again ensuring that the beneficiary will not be burdened by the responsibility of repaying them when the insured passes away.

This is how it works. You purchase the insurance plan. This insurance will cover you effectively for the term or the number of years specified in your insurance contract. Within that term, too, you will have to pay insurance premiums regularly. If you die within that specific time period, your family or whoever your beneficiary is will receive the amount of money specified in the plan. If you don’t die within the term, you lose your premiums, unless your policy states that you get them back.

Decreasing Term Life Insurance

This is taken out specifically to provide a contingency for repaying the policyholder’s loans and mortgages just in case he passes away before he’s able to repay them. The insurance coverage is for a specific period (usually equivalent to the life of the mortgage or loan), and the level of coverage decreases during the policy’s term – usually in conjunction with the amount of the loan or the mortgage (e.g., as the loan is repaid, the amount of cover is reduced to cover the balance remaining). The premium remains constant during the term of the policy.

Decreasing term insurance works pretty much the same way as level term insurance in term length and what triggers the payout. The only difference is the decreasing value of the coverage.

Whole Life Insurance

If you take out this type of insurance, your family or beneficiary will get a lump sum of money. This money can then be used to pay for your children’s educations or mere day to day expenses.

Of all three types, this is the most expensive in terms of premiums. However, this type of insurance lets you build cash value which you can loan out. You can also surrender the insurance in exchange for the total cash value of the policy. This type of insurance is therefore more flexible since it offers you more options. Moreover, you have coverage as long as you live, provided of course that you keep up your premium payments.

The above are only three of the available life insurance options available. It would be best to sit down with an authorized insurance person for advice on the best type of insurance for your particular needs.

Types Of Life Insurance Settlements

A life insurance settlement is defined as the selling of an active life insurance policy for a lump sum amount to any other interested part. However, sellers need to ensure that, the value of the policy received after sale is more than, its cash surrender value. Usually, a life insurance policy is considered to come into effect only after the demise of policy owners. By opting for life insurance settlement, policy owners have the choice to materialize, the value their life insurance policy during their lifetime. There are many types of life insurance settlements plans such as senior life settlement and vatical life settlement.

Life settlements mean selling life insurance policies to a third party buyer in exchange for a lump sum amount. They generate immediate liquidity from a non-performing asset. This allows policy owners, who are seniors over the age of sixty-five, to cash insurance policies that are unwanted, or have become too expensive to be affordable or have become obsolete. They are also known as senior settlements, lifetime settlements, or high net worth transactions.

Life settlements are now a necessary point to consider in the estate planning process for seniors. Before the introduction of life settlement option, there was no option for people above the age of sixty-five, who had an unwanted life insurance policy. They can lapse, cancel, or surrender their policies to the insurance company for the surrender value.

Viatical settlements are a goop option for people who are suffering from any kind of terminal illness. It allows them to make use of the current value of their life insurance policy. This helps them financially to pay for the expensive treatments required for their illness.

The popularity of life settlements has given rise to an industry that has, created a competitive secondary market for life insurance policies. Consumers now have the freedom to sell their policies in an open market for the highest obtainable value. This value is much more than the cash surrender value of the insurance policy.

Five Features You May Not Be Familiar With Regarding Term Life Insurance