Life Insurance: Types of Life Insurance Policies and How to Maximize Them

When you consider the suddenness with which events happen and people die, you will realize the necessity of having life insurance policies to protect your loved ones in the case of any eventualities. On a final analysis, life insurance policies do not only protect your families and loved ones or dependants, it also protects your future in case you eventually “refuse to die!”. In the case that your life insurance policy expires and you are still living, you could renew for another life term or use the investment as savings for some other personal things.

Depending on your country, there are various types of life insurance policies that cater to the life and death needs of customers, but within the United States, the two main categories of life insurance are: whole life insurance, and term life insurance – but there are several of kinds of life insurance listed under these two broad categories. The whole life insurance policy is a plan that you buy for a fixed number of years with a fixed premium rate, and it has the additional advantage of qualifying you for investment benefits against which you can borrow without being taxed. But term life insurance policy can also go be taken out for a fixed number of years, but it does not include investment benefits and opportunities.

Monthly or annual premiums for young persons are relatively lower or cheaper than when you are older. For instance, as a young man of about 30 years you pay about $100 monthly on your life insurance policy for an annual coverage of up to $250,000 but surely pay much more than this if you are 40 years above for the same annual coverage sum. The more you get older the higher your life insurance policy premiums get. Now, most insurance agents within the U.S would usually try to sell whole life insurance policies to you because they offer more security and protection benefits, but they probably won’t tell you that the premiums cost more and that they receive more commissions on whole life than on term life insurance policy. In fact, agents receive up to 80% of your one year’s premiums as commission while they receive significantly lower rates on term life.

Having known the above, the next thing to consider is the amount of life insurance cover to buy. There are many factors to consider before finally determining life insurance but many finance experts are of the opinion that you must buy a 5 or 10-year worth of your current salary. Since life insurance is to ensure that your family still enjoys their current standards of living in the event of your death, experts opine that it is best to buy a 5-10 year worth of your current salary so that your family will not be financially affected by your sudden death. Meanwhile, you’ve got to factor in instances of any of your older children leaving your care and fending for himself, or what would happen your spouse leaves and the issue of child custody comes up. You must also determine how long or how many years you want to keep the insurance policy active without defaulting before it expires at your death or to serve your investment purposes.

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