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Choosing a Life Insurance Plan
Choosing a life insurance plan can be confusing if you do not know where to begin. And the best place to begin is simply this: ask yourself this question: do you really need this particular insurance plan? And if you don't then do not buy it. But this, however, does not mean you will not require one at some point or the other in your life since every one of us is exposed to one risk or another at different stages of our lives. Consequently, we will need this, but our life insurance needs differ and can be met by different types of insurance policies.
There are basically two types of life insurance plans and these include: whole life insurance otherwise known as permanent (life) insurance and term life insurance. Whole life insurance can be further divided into three; this includes: traditional whole life, variable life and universal life. With traditional whole life, there are many guarantees; for one, the yearly premiums are guaranteed and so also are death benefits and cash values. Today, many whole life policies are participating, which means dividends can be used to shore up death benefits and/or cash value, reduce premiums or be paid in cash. This type of insurance policy may be the one for you if you are conservative and have problem saving.
Universal life is designed for those who prefer premium flexibility. Premium in this case can change from one year to another with the possibility of premium not even being paid sometimes. This also has guaranteed maximum premiums, minimum guaranteed death benefits and cash values. Here, instead of a dividend, the insured earns interest based on a determined rate each year. Variable life insurance is designed for the savvy investor who is knowledgeable and is willing to take risks. There are few guarantees here including a guaranteed minimum death benefit and the required yearly premiums, nevertheless this option offers the greatest potential for increasing your cash value over time.
Term life insurance on the other hand is one where insurance coverage is offered for a time-period of say 20 or even 30 years. After which it can be renewed thereafter to continue coverage. There are basically two options available with term insurance. One is the annual renewal term that allows you to increase premiums, while the other is one where premiums are fixed for a number of years. Most term insurance policies can be converted to whole life insurance.
Finally, before selecting which life policy to purchase it is advisable to conduct research by reading from several sources on the subject. There are some reliable resources online to guide and help you make the right decision for you. Note also that insurance is not wholly an investment tool and should not be used as such as advised by experts. If investment is what you are seeking, then it is better for you to put your money in the stock market.
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