Different Lives: What You Should Know About Life Insurance
If we have to be very technical about it, a life insurance policy, or life assurance, is actually a contract between the insurance company and the policy owner, where the insurance company contractually agrees to pay pre-set amount of money in case the insured person dies.
But just before death, the insured person agrees to regularly pay premiums or, in the alternative, pay a lump sum or “paid up” insurance. In the United States, the insurance company simply pays a lump sum of money to an owner’s beneficiary. There’s no payout if the insured person committed suicide.
There are basically three types of life insurance policies and then there is premium finance:
This is the cheapest of all life insurance programs precisely because you are only covered for a specific time period (one year, ten years, 20 years) and there are no returns on the policy. Some insurance agents like to call this pure protection insurance.
Top Term Life Insurance Site: Prudential
With a whole life insurance program, you pay the same amount of premium at the time that you got the policy (premiums are based on age, sex, smoking habits). Typically, you will be able to apply a loan against the policy when it has aged at least two years or has gained cash value.
This type of insurance program is basically middle of the road – it’s more expensive than term life insurance but much cheaper than an investment-type life insurance policy.
Top Whole Life Insurance Site: New York Life
This type of life insurance program actually earns interest on your premiums, which is paid out in cash at regular intervals. Not surprisingly, this type of insurance program is also the most expensive life insurance policy.
Top Investment Life Insurance Site: John Hancock
This allows well to do individuals to take out large insurance policies without having to liquidate their assets. Using a premium finance program all initial loan charges as well as added interest is paid off from the death benefit, with the remainder going to the demised's family.
Top Premium Finance Site: Prem Finance