“Peace of mind”

Life

Term life insurance is claimed to be the easiest of the life insurances to understand and is named “term” because you are protected for a certain period of time – a term.

The idea behind this insurance is that you can cover a small period of time with much coverage and little cost. You can use this insurance to protect yourself if you hold a large debt, such as a mortgage.

For instance, let's say you only signed up for a 30-year mortgage and you are the only source of income for your household.

​You could use term life insurance to cover the balance of the loan for a set period of time so your family wouldn’t be in trouble if something were to happen to you.

Whole life insurance means coverage for your entire life, as long as you continue to pay the premiums on time. Sometimes you can convert a term life insurance policy into a whole life insurance policy, so that’s always a choice if you want to.

As for the premiums, this is where the companies try to get you in early so the payments stay pretty level as you grow older.

Since you are less risky when you’re young, the earlier payments essentially offset your later payments as you become older and riskier.

The other main difference is that there is a guaranteed cash value for the policy that you can actually borrow from. Every bit you pay premiums, a percentage of that goes into the guaranteed cash value bucket that is available to you if you decide to give up the policy after.

How much and how quickly that occurs depends on the type of policy you have and other factors.

Another name for this is Flexible Premium Adjustable Life Insurance. This is a flexible version of whole life insurance where you get the savings element of whole life.

The insurance company will invest your savings, offer a guaranteed minimum, and you make those funds tax deferred. What’s flexible is there are two death benefit options.

The first is that they pay out the policy’s cash value. The second alternative is that they pay out the face amount of the contract plus any cash value you accumulated.

The first option is cheaper because the company pays out less insurance and the second is more expensive because they pay out more.

This is also called Variable Appreciable Life Insurance and it is basically part life insurance and part investment account.

The variable refers to the idea that you can specify a percentage of your premium to go towards a separate investment account that can appreciate (or depreciate).

​While some places will claim there’s a minimum, since it is partly an investment.

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