There are two types of life insurance; term, and permanent. Term
life insurance is less expensive, and offers you coverage for a
pre-defined period of time. It does not accumulate value over the
years, but does offer other advantages in terms of cost. Often, younger
people opt for term insurance, especially if they have younger children
that they wish to protect.
Permanent insurance, sometimes referred to
as "whole life," is designed to last your entire lifetime. Your
premiums will be more expensive than with term insurance, but it
accumulates value. Loans may be taken out against it, or it may be used
as collateral. Also, while an insurer may opt to not renew your term
policy after the term has expired, permanent insurance is just
that--permanent. So long as you keep up your premiums, your policy
cannot be cancelled.
Whole life insurance carries a fixed benefit and premium, which will
not increase as you age. Term insurance is much cheaper for younger
people. Another option is universal life insurance, a type of permanent
insurance which carries a benefit that is linked to the interest rate
and the underlying investments.
As you would when dealing with any financial institution, before
purchasing, you should check the ratings of the insurer. Insurance
rates vary from company to company and state to state, and different
states may have different regulations pertaining to tariffs and fees.
Although there are some regulations pertaining to content of policies,
not all policies are the same, and so it pays to review the offerings
of several companies ahead of time before making a decision. Premiums
may vary by as much as 50 percent or more in some states.
Lastly, when you are considering a policy, take into account the
availability and expense of riders, or extra coverage, which you may
need. Some common riders may include a renewability provision, which
guarantees that you will be able to renew your term insurance after the
term has ended. A waiver of premium rider can be useful, as this
guarantees that you will not have your policy cancelled if you become
disabled or unable to pay your premiums.
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By: Debbie L King Posted: Feb 06 2006 03:02:28 AM