Life Insurance Options to Protect Your Family
Different Types of Life Insurance
There are two basic types of Life Insurance. The first is Whole Life Insurance. The second is Term Life Insurance. Any other Life insurance is comprised of these two.
Whole Life Insurance
Whole Life insurance is simple. There is a death benefit and a premium. Neither changes throughout the lifetime. Both death benefit and premium remain the same. Whole life insurance has a cash value. The cash value is a dollar amount that increases throughout the life of the policy. The owner can borrow against the cash value. There is an interest rate charged annually against the borrowed amount. The borrowed amount will be subtracted from the death benefit when death occurs. The cash value is a separate account. It is not included with the death benefit. Death benefit is face value purchased less any borrowed funds and interest, if cash value is borrowed against. The purpose of whole life insurance is a guaranteed death benefit.
Term Life Insurance
Term life insurance is more of a temporary life insurance and typically has lower monthly or annual premiums. It only stays in effect for a limited period of time and ends on a specific date. During this period there are premium rate increases to keep the coverage in force. There is no cash value with a term life insurance coverage. The purpose of term coverage to cover short term conditions, such as funds for a college education for children or income for a spouse upon death of an income provider.
Any other life insurance coverage is the combination of whole life and term life insurance.