To be truthful, the majority of people don’t give much thought to life insurance policies. Many employers provide life insurance benefits, and, be honest now… you give life insurance paperwork a cursory glance, wherein you might study your health insurance benefits a little closer. For those who are not fortunate enough to have a life insurance policy through your employer, you probably push the thought of getting a policy in place to the back of your mind. After all, who wants to deal with that morbid topic? But procuring life insurance is not something you do so much for yourself, as for the loved ones you leave behind. In fact, people are so lackadaisical regarding life insurance, often you are spurred to taking action only when someone you know relays their terrible tale of woe to you after their loved ones dies, and, then you vow that you won’t let that happen in your home.
The life insurance maze
You can search the internet and glean much information that will explain the various types of life insurance available for purchase and implementation. Or, a better suggestion would be to contact a life insurance agent in NJ who is familiar with life insurance policy, their specifics and premium amounts so that you ensure you will leave your loved ones adequately protected and compensated for your loss of life. An NJ insurance agent will walk you through all of your options and help you design the plan right for you. Before your initial consultation with such an insurance expert, you should familiarize yourself with the basic concepts of life insurance.
Types of life insurance policies
A quick perusal of available life insurance policy information will demonstrate that policies greatly vary as to duration, structure and premium costs. Let’s take a look at some of the policies available to understand the lingo:
- Whole life insurance policy
Purchasing whole life insurance provides guaranteed insurance protection for the entire life of the insured, otherwise known as “permanent coverage”. A whole life insurance policy grows in value at a low-interest rate until the policy is surrendered, e. cashed in. This type of policy is guaranteed for the insured’s lifetime, and, also as to death benefit. The premium amounts paid, as stated above, continue to grow and are tax-free until you withdraw the money, or it is used as a death benefit payment.
- Universal life insurance policy
A popular variation of the whole life insurance concept is known as universal life insurance. It is also referred to as flexible premium or adjustable life insurance. Like whole life insurance, you have the ability to surrender the policy for cash value. In a universal life insurance policy, there is a sliding scale of benefits depending on the needs of the insured, the premiums, cash value and level of protection.
- Variable life insurance policy
Variable life insurance is a hybrid of the protection offered in a traditional policy plus the ability to grow the funds to date, similar to a savings account. The word “variable” is key because it means the value of the cash and death benefit may fluctuate. There are actually two distinct components of the savings account: a general account and a separate account. The general account is considered to be the insurance provider’s reserve or liability account and is not allocated to the individual policy. The separate account is considered a financial investment, because it consists of a portfolio filled with various investments like an equity fund, a money market fund, a bond fund, or a combination of these. Because of this underlying investment feature, the value of the cash and death benefit may fluctuate, thus the name “variable life”.
- Variable universal life insurance
This is another hybrid policy wherein the insured may choose both universal life and variable life insurance components to allow greater flexibility of adjustment of premium amount and death benefits, as well as the investment selection. This type of policy with its intricate investments is akin to investing in the stock market. For this reason, variable universal life insurance policies are viewed as “securities” and therefore are strictly regulated by the Securities and Exchange Commission and are regulated by the Insurance Commissioner. You should bear in mind that the volatility of the stock market will indeed cause the policy to rise and fall, and cause the “investment” to fluctuate, but, at any rate, the policy guarantees beneficiaries will receive a minimum death benefit.
- Term life insurance
This is the insurance policy most of us are familiar with. The beauty of procuring term insurance is that it will protect your beneficiaries from enduring financial loss as a result of your death by paying the face amount of the policy for a definite, however, limited, amount of time. Unlike the life insurance policies listed above, this is a simple straightforward policy which does not build cash values and has a maximum term period (usually 30 years). A term policy is beneficial for those who do not wish to borrow from it during the pendency of the policy, and only wish to ensure death benefits are in place at the time of their death. As to pros and cons, the major drawing card for this more-basic policy, is that its premiums are lower throughout the duration of the policy is in effect. The downside is that as the owner of the policy gets older, the premium price often increases.
Sometimes it is hard to grasp the concept of the particular insurance policy that is just perfect for your needs, be it home, car, health, disability, or long-term care. The procurement of life insurance to protect your loved ones after your demise is a worthy investment. Now that you’ve had a look at the variations of life insurance available, why not make an appointment in the near future to speak with an expert on the subject? Consult with someone who understands and will counsel you on this valuable insurance by contacting a life insurance company right here in New Jersey now.
