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There’s More to Life Insurance Than Term and Whole

Are you aware that there are different kinds of life insurance, and that each one is specifically designed for the varying financial needs people have? In fact, in you include variations of each of the basic types of coverage, it would be easy enough to list perhaps 50 or more kinds of policies. Fortunately, unless you work in the industry, you’ll never have to master the details of the many kinds of life insurance that people buy to meet the myriad needs of providing for loved ones in a time of need. The other good news is that anyone can quickly review the main kinds of policies and learn about how sell a policy should you ever wish to do so. Here are more details about the subject, who needs what type of coverage, and how viatical settlements work.

Term

Source: wiener.co.rs

Term is the least costly of all the main categories of coverage. Insured get a guaranteed death benefit amount that never changes, fixed premium payments in most cases, and a set amount of time during which the carrier keeps the coverage in force, the term. Most terms last for 10, 15, 20 years or more, usually increasing by increments of 10 years. There is a higher-priced version called return of premium that, as the name implies, returns your payments to you should you outlive the term. Many people like the idea of getting their premiums back that they’re glad to pay a little extra for this variation on the basic theme.

Policies You Can Sell: Viatical Settlements

Before moving on to the rest of the categories of insurance protection, it’s important to note that most life policies can be sold, especially if the insured becomes seriously ill. The process is called a viatical settlement and it allows living policyholders to obtain a cash payout to cover medical expenses or anything else. The best way to acquire a clear understanding of how these settlements work, how to apply, and what your expected payout would be is to review, at this site here, a basic guide on viatical settlements. Most people are surprised at how simple and fast the entire process is.

Basic Whole

Source: westerlaw.org

The vast majority of working adults are familiar with whole life. As its name indicates, it lasts for your entire life, comes with a guaranteed cash value and death benefit, earns a stated or variable amount of interest during the life of the coverage, and many varieties offer level premium payments. Choosing life insurance is not as trivial or flexible as choosing wall art for your home office so understanding the risks up front is essential. For holders, the only risk involved is that you could park your money in a place where you earned much more interest, like a stock-based IRA. However, IRAs and other kinds of investments don’t offer large death benefits if you die young.

Universal

The unique feature of universal is that you can choose to change the death benefit amount after purchase. Additionally, people opt for universal when they want the chance to use the accrued interest (on accumulated cash value) to make payments during times of low income or financial duress. Each year, the company adjusts the interest rate at which the cash value grows, and policyholders can choose to make higher or lower premium payments. People who like to make changes to their insurance protection as their financial situation changes often purchase universal products.

Indexed Universal (IU)

Source: investopedia.com

The key word here is indexed, because the amount of interest you earn is based on the performance of an underlying stock market index. Further, IU offers lifetime coverage (unless you stop paying), a fixed death benefit, and variable payments. Note that indexed universal holders can use their entire cash value, not just the built-up interest, to pay premiums during tough financial situations.

Variable

What’s variable about this kind of protection? The insurer uses a pool of different funds as a kind of sub-account that earn interest. Results can be good or not so good. And, while premiums are level and there’s a guaranteed death benefit, the cash value could end up being zero, depending how the investment pool performs.

Variable Universal (VU)

Source: itm21st.com

This variation on a variation is not as complicated as it sounds. In fact, it resembles the more straightforward type of variable coverage in most ways, except for a few. Those exceptions include the fact that an insured person gets a promised cash value but can use that cash to pay premiums. Additionally, VU offers holders the chance to adjust the required payments.

Final Expense

Final expense is a general category that includes two different versions, namely simplified, and guaranteed (see below). But in general, this kind of protection is ideal for people who either can’t qualify for standard types of coverage or only need to make sure that funeral and other final expenses get taken care of. Premiums tend to be high, and there are caps on the payout amounts, which usually go no higher than $50,000. These used to be called burial contracts because they’re most often used to pay for the high cost of funerals, burials, and cremation. If you contact an agent and ask about buying a final expense product, the first thing you’ll be asked is whether you’re looking for simplified or guaranteed contracts. It helps to know about these two basic versions of final expense, which are discussed below.

Simplified

Source: foxbusiness.com

To meet the high cost of funerals and burials, many folks opt for simplified contracts. You might have heard of them under the name no exam insurance, which is sort of a misnomer. Even though you won’t have to undergo a medical exam, if you use tobacco products or are seriously ill, the company might deny the application. Plus, as with all final expense products, premiums can be pricey.

Guaranteed

Guaranteed final expense products live up to their name, even though prices are high. However, no matter what your state of health, whether you smoke or not, or anything else, you will be approved if you are able to pay the premiums. Note that you’ll often have to live for at least two years (the waiting period) before receiving the payout. If you die before the two years is up, most insurers will return your premiums along with a market rate of interest.

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