Financial Planning Q 'n A

What kinds of Life Insurance are there?

There two basic types of life insurance with varying permutations; temporary and permanent. Temporary is insurance, which as the name describes, is for a fixed period of time. The time could be one year, five years, twenty-five years or anything in between. This type of insurance covers your basic needs for a set period of time and is what is known as pure insurance. There is no savings component to the plan. If you die within the policy term and your payments are up to date, your beneficiaries will receive proceeds. If you continue to live after the term expires, there is no refund of your premiums and the policy simply disappears. Permanent insurance comes in several varieties. Policies described as Term to 100, Whole Life and Universal Life are all permanent types of insurance. As the name describes, the policy is intended to be in force for your entire life. In its simplest form, premiums are paid every year forever, although in many cases they stop after reaching a certain age. In other cases, premiums over and above the pure cost of insurance are paid until it is determined that no more premiums ever have to be paid to keep the policy in force. In its more sophisticated form, additional premiums are contributed to an investment account which may be used for a death benefit or for retirement planning.