Of the many types of insurance, life insurance is perhaps one of the most common, second only to auto and health insurance.
It is fair to say, however, that life is very different from most other types of policies.
Auto pays in the event of an accident, health in the event that medical treatment is needed; life pays in the event of death.
All the same, life is a very important policy in the long run.
As hard as it may be to come to terms with, death is an inevitable part of life, and life insurance can be a life-saver for the family left behind.
What can also be different from other policies, and maybe just as difficult to deal with, is choosing the best life policy to leave behind.
Despite however morbid it may seem, it is important to consider carefully what type of policy will be most profitable: every insured person is different, as is every beneficiary, hence the type of policy should fit yours' (and your beneficiary's) particular circumstances.
Two major types of life policies are most dominant: term and whole life.
Term Life Insurance The simplest type of insurance for life is this one.
It costs the least and has a particular value, as well as a particular term.
The term, however, is a set amount of time during which the insured person is covered, a death one day after could mean no payout.
An insured person pays a fixed rate over this term, which can range in amount depending on the overall value of the policy.
The shortest possible term life policy goes for 1 year.
Whole Life Insurance Whole life insurance is the same as term in several respects, the premiums are fixed, the policy has a set value, and it is not invested by the insured.
The distinction between whole and term life is that whole life covers the insured's entire life, as long as they continue to pay into the policy.
Whole life policies do also have cash value, allowing the policyholder to borrow against the value or cash out before their death.
Things to Remember While Preparing for Life Insurance Whether you choose term, whole life, or another form of insurance, there are several important considerations to make before making an informed decision: Calculating cost and need.
Arguably the most common reason that the uninsured stay uninsured is that, according to them, plans are either too costly or too unnecessary.
In truth, even a little life coverage has the potential to help, and almost anyone leaving behind a dependent family member has the need.
It is important to truthfully and carefully calculate the cost and need of a life policy when making a decision on what type and how much life to purchase.
Term life plans can be renewable.
A person who chooses a term life plan runs the grave risk of losing coverage when their term ends.
For many policies, however, there is a renewal period that allows the term to be extended, forgetting to extend or not being able to extend can mean the insured person loses all they have placed into the policy.
Being underinsured.
LIMRA International, an authority on life policies in the US, counted most life policy holders as actually being underinsured.
According to their statistics, most only have coverage for about 4 years of their income, whereas it is recommended to have a plan covering at least 7 years.
On top of this, 56 percent of policy holding parents acknowledge that their coverage is not enough.
Getting the right type of insurance, life insurance, can be important to staying properly insured.