© 2007 Midwest Financial Services, LLC
Life Insurance is one of the most misunderstood types of insurance we buy. The fact is we all know we need it, but the majority of us do not know the basics of life insurance or how to shop for the right type of life insurance. The first thing to know is that there are two basic types of life insurance, Permanent Life Insurance and Term Life Insurance. Let’s take a closer look at the differences of the two.
Permanent Life Insurance is a policy that provides protection for an entire lifetime
as long as the minimum premiums are paid. The premiums are often higher on a permanent
policy than a term policy. Permanent policies also give you flexibility with the
premium options as well. The most common are using a single premium paid up policy,
paying premiums until age 65 and stop making premium payments assuming there is enough
cash value to support the policy and paying regularly for the life of the policy.
As mentioned permanent policies build cash value, earnings on a portion of the premium
payments set aside in a separate account called sub accounts. The cash value portion
of the policy also builds tax deferred. In certain instances you can borrow from
the cash value tax-
Term Life Insurance is a policy that provides coverage for a specified amount of time, often 10, 20 and 30 years. This is the least expensive type of insurance. Simply stated, if you die within the specified period of coverage a death benefit is paid to your beneficiaries. If you do not, the coverage will stop unless you renew the policy. There is no cash value built with term policies, but there are return of premium options that will refund a portion of the premium if not used.
There are several misconceptions about the affordability and availability of life insurance that might surprise you
Most people have at least some life insurance. But do they have the right type and the right amount of coverage?
Resources
Permanent Life Products
Term Life Products
Life Insurance