How will your family survive when you are gone? Will your love ones have the financial burden of your funeral expenses? Will your spouse be able to keep the family home, pay bills, and pay for the children college education? These are things no one wants to think about, but realistically should be part of your financial plan. Having life insurance can give you the peace of mind that these things will be taken care of when you are gone. If people understood the benefits of life insurance they would be more likely to invest in a life insurance policy. This essay will examine the variety of life insurance products available, the benefits of purchasing life insurance, and the cost of life insurance in today’s market. Types of Life Insurance
“Term insurance usually provides the largest amount of insurance protection at the lowest initial cost. It last for a specific time period, or “term.” Consumers purchase term life insurance for many different reasons. “Because they are time-specific and relatively inexpensive, term policies are typically best for providing protection for large commitments or needs of known duration.” For example, a married couple may purchase a term life insurance policy on each other to cover their mortgage in the event one was to die unexpectedly. Traditionally, term policies did not earn cash value, or dividends. In today’s market there are multiple term products available that offer more features than the traditional term policy. For example, Prudential offers a term policy called Prulife Return of Premium Term. This product gives you all the benefits of a traditional term policy, but it returns the premium paid for the life of the contract if the insured person outlives the term period. Additionally, term life insurance normally includes an option to convert your term policy to permanent insurance. “Permanent life insurance helps provide protection for as long as you live and can be used to cover long or unplanned needs. It can be used by itself or in conjunction with term insurance.” The most common types of permanent life insurance policies are whole life, universal life, indexed universal life, variable universal life, and survivorship. Because of the variety in the permanent life insurance market consumers will have no problem finding a product that will fit their needs.
Whole life insurance is the most common type of permanent life insurance. This type of coverage requires the “premiums are paid on time, your coverage remains in force, and the policy will build cash value.” Traditionally this type of policy would earn dividends that could be used to increase the value of the policy, or disbursed to the policy owner for additional income. Because consumers demanded more investment options within their life insurance products traditional whole life policies are a thing of the pass. For this reason, most new whole life products would be universal life, or variable universal life.
Universal life insurance is a whole life policy that earns a fixed amount of interest. This type of policy would spark the interest of the consumer wanting to increase the policy value without having the stress of investing in a volatile stock market. Unlike traditional whole life insurance universal life products have a flexible premium option. This allows the policy owner the option to use the value in the policy to pay for the cost of the insurance, instead of paying the premium out of pocket. Furthermore, the client has the option to drop in additional funds taking advantage of the interest earning feature that will increase the policy value for future income, or increased death benefit. Additionally, universal life products are a great stepping stone to a consumer who may want to purchase variable universal coverage in the future.
Variable universal life products are designed for the consumer who wants a product with the greatest earning potential. This product has all the benefits of the universal life...
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