Choosing a life insurance policy can be a frustrating task,
but it doesn't have to be. To best compare life insurance you
need to understand a few key terms. First, when you are investigating
a policy, you should know what type of policy it is. Life insurance
is separated into two distinct categories: term and permanent.
Term Insurance,
usually the least expensive form of life insurance, is selected
for set number of years. Within the life of the policy, if you
pass away, the death benefit you have selected will be paid
to the beneficiary or beneficiaries of the policy. At the end
of your term you will have the option to renew your policy.
In the event that you do not renew your policy or you discontinue
making the premium payments the coverage will end and no payment
will be received.
At Financial One we offer the newly introduced Return
of Premium term insurance. This type of policy is for the
person who thinks, "I'm not going to die before my term expires."
In this case, if a policyholder holds onto his or her policy for
the duration of the term, then the policyholder gets back all
of the premiums paid into the policy at the end of the term period.
The other type of life insurance is a permanent policy. A permanent
policy is exactly that, permanent, meaning that you will be
covered for the rest of your life. At Financial One we offer
two different types of permanent life insurance: Whole Life
and Universal Life.
To best compare these flavors of permanent policies you have
to know a little bit about each type.
Whole life guarantees death benefits and premiums are fixed
for the life of the policy which makes it a very stable policy,
but the downside to this type of plan is that it is inflexible
and the potential rate of return is not very competitive. Universal
life's goal is to eliminate the flexibility problems associated
with Whole life by allowing for flexible premium payments along
with the potential for an increase in the internal rate of return
on the policy. Universal Life insurance revolves around a cash
account, which acts like your own bank account but for insurance.
As premiums are paid and interest is earned the account increases
while mortality and administrative costs decrease the value.
Now that you know a little bit about the different types of
life insurance policies available you will hopefully be able
to weigh your options more efficiently to choose the plan that
fits your needs.
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