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Why Do I Need A Life Insurance Policy?

You're an important part of your family, right? You contribute to their livelihood and well being in some way, be it financially through your career or as a stay-at-home parent or a combination of the two. What would happen if you weren't around to ensure your family's daily needs are being met? Life insurance can help make sure that in your absence, those financial needs are taken care of long into the future.


What are the requirements? 

Your overall health is looked at closely during the application process, but a standard term life policy will typically cover death by any cause at any time, except for death by suicide within the first two policy years (one year in some states). Payment options are flexible making it a more affordable option for people on a budget.


What is “Term” Life Insurance? 

Term life insurance is the most affordable kind of life insurance. It's also the easiest to understand. It comes in pre-determined lengths of time, or terms, of 5, 10, 15, 20, or even 30 years during which the company offers level premiums that are guaranteed not to increase. As long as you pay your premiums on time, the company issuing the insurance policy cannot cancel you. If your term reaches its end, you can choose to start a new policy or continue the current policy with rates that reflect your current health, age and lifestyle.


The term life insurance policy is a simple death benefit protection without all the additional components that usually make other kinds of life insurance difficult to understand and manage.


What is “Whole” Life Insurance? 

A life insurance contract with level premiums that has both insurance and an investment component. The insurance component pays a stated amount upon death of the insured. The investment component accumulates a cash value that the policyholder can withdraw or borrow against. A whole life insurance policy covers you for your entire life, not just for a specific period such as term insurance. Your death benefit and premium in most cases will remain the same. Whole life insurance also builds cash value, which is a return on a portion of your premiums that the insurance company invests. Your cash value is tax-deferred until you withdraw it and you can borrow against it.


Are There Choices Within Whole Life Insurance?

Yes, the most common choices include traditional, interest-sensitive, and single-premium whole life insurance policies. A traditional whole life insurance policy gives you a guaranteed minimum rate of return on your cash value portion. An interest-sensitive whole life insurance policy gives a variable rate on your cash value portion, similar to an adjustable rate mortgage. With interest-sensitive whole life insurance you can have more flexibility with your life insurance policy such as increasing your death benefit without raising your premiums depending on the economy and the rate of return on your cash value portion. Single-premium is for someone who has a large sum of money and would like to purchase a policy up front. Like other whole life insurance options, single-premium whole life insurance accrues cash value and has the same tax shelter on returns. Whole Life Insurance vs. Term Life Insurance. Unlike term life insurance, a portion of your premium money goes toward your cash value, which in turn could pay off your entire policy only after a few years. Also, your premium will remain constant during the time you are covered unless you choose otherwise. And, unless you make a change to your whole life insurance policy, you have lifelong coverage with no future medical exams. Whole life is also a good choice because of the tax savings.

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