A life insurance policy isn’t something one can just get up and decide to sign up for. Its significance is highly relevant in today’s world and shouldn’t be taken for granted. People who don’t know much about life insurance policies end up risking it and signing up for random policies that end up not working for them in the future. Let’s take a look at a few insurance policies that everyone should understand:
Term Insurance Policies:
A renewable term insurance policy gives more rights to the policyholders than most insurance policies. A term insurance policyholder has the right to renew his terms even if the contract is ending, as long as the premiums are fully paid. A convertible term insurance policy on the other hand allows the consumer to convert a term insurance policy to a permanent one whenever they want. This allows to build up cash value for later years. In this policy, the premiums are often more expensive and can have a higher cost of building up the cash value.
A significant feature of term insurance policies is the return of premium (ROP) feature which allows the reimbursement of any payment made for the premiums if the death benefits are not paid out by the insurer when the policyholder passes away. This feature doesn’t come cheap, which is why term insurance policies are expensive but definitely worth it. A cheaper alternative is also available:
Whole Life Insurance:
A whole life insurance policy can be categorized into two policies: Non-participating and participating. The short period of payments required as premiums retain lifetime protection and are cheaper than most policies. These premiums and cash value accounts are paid over a short period and are known to help out in more creative ways than a term life insurance policy.
A whole life insurance policy offers a scheme that allows the policyholders to get guaranteed lifetime protection if they choose to make a single payment that covers the lump sum of the policy. This scheme also sets up an immediate cash value account which some people love to have. There are many more benefits of cash value whole life insurance policies, like:
- Flexible Payments: If the insurance policy is funded properly, the payments of the policy’s premiums are made much easier. You can make your payments whenever you want and even choose your own amount in a whole life insurance policy. This gives the policyholder more flexibility as it maintains their financial status.
- Accessing the Cash Value: A cash value account of a whole life insurance policy is something that shouldn’t be undermined. It works in a similar way and is as helpful as an average savings account. The premiums you pay for a whole life insurance policy will be saved in the cash value account and can be accessed anytime, anywhere. You can withdraw the money from the account and it’ll have no tax on it, just a small interest rate.
- Leaving a Legacy: Leaving a legacy is something people only dream of doing. While some may succeed in it, others don’t. If you want to leave a legacy that your loved ones benefit from, whole life insurance is the best way to do that. It can cover the funeral costs, medical bills and replace your income after you pass away. A sincere act like this is never forgotten.