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Four Of The Most Common Types Of Life Insurance

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  • August 15, 2014 10:50 PM
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“Life Insurance sounds really complicated. I live well, I take care of myself, I’m not sure I even need it. And to be honest, I don’t understand what the different types are…”

Does this lament sound familiar at all to you? If it does, allow us to encourage you to keep reading!

Yes, insurance as an umbrella term can seem complicated. And when you narrow it down to Life Insurance, it is complicated. But not only is life insurance complex, it tends to make the individual considering it, think about the future. Which is why making decisions about the validity of life insurance in your life, should not be based solely on your state of health and quality of life in the immediate present. Life happens fast, and there are things that are not in your control that can change the course of your life and the plans you may have had. Life insurance, however, is something that you can control, Below we have listed four of the most common types of life insurance available to you:

1)     Term Life is considered the most affordable type of insurance, as it provides coverage for a specific amount of time/number of years. The policies terms are usually from 10 to 30 years, this is the most common type of life insurance and you can consider it should your budget be significantly modest or otherwise dedicated.

2)     Universal Life (a fairly modern life insurance format) maintains a flat but flexible premium rate for the duration of the policyholder’s life. You can however tailor the costs up or down to suit your budget, thereby affecting the actually quantity of life insurance you’re able to access.

3)     Whole Life represents a premium format that is fixed and cannot be changed, once the agreed-upon amounts are committed to. These policies have a cash value, and can be borrowed from as a result. Of course, the more you borrow from it, the less your beneficiary has to work with at the end of your life.

4)     Guaranteed Issue Whole Life is the most expensive of the entire lot, with premiums that are multiples more than other life insurance policies, it is typically purchased by those who have severe health problems or preexisting conditions. Not available in every single US state, this type of life insurance usually only offers up to $25,000.00 death benefit (the death benefit range can be from $5,000-$50,000), and the entire amount is not remunerated if the policyholder dies within the first couple of years of policy acquisition (policies will differ based on carrier).

Common misconceptions about life insurance include concerns about age, appropriate coverage to lifestyle and the quotation process.  You are never too young to get life insurance – in fact the sooner the better. As far as coverage to lifestyle – life insurance, like any insurance, is a commitment, not often easily backed out on. Be realistic about your earnings and activities, and honest about your health, so that when you acquire a policy, it is one you can maintain. And finally, we can’t stress enough the importance of quote sourcing. Do not commit to the first policy that’s put on the table. Compare and contrast quotes from several providers, and make sure that all of your questions are satisfactorily handled, before commitment.  Life insurance can be very complex so don’t be afraid to ask every question that comes to mind and only move forwards with a policy when you feel that you understand it.

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