There are many types of life insurance, but for all of them the bottom line is the same: They pay cash to your family after you die, thus ensuring your loved ones are financially secure. Life insurance payments can be used to cover daily expenses, mortgage payments, outstanding loans, college tuition and other essential expenses. Most importantly, death – benefit proceeds of a life policy are almost never subject to federal income taxes. If you’ve worked hard to establish a strong financial framework for your family – investments, home equity, a savings plan, and retirement accounts – life insurance is the foundation upon which it rests. It can guard against the need for your loved ones to make drastic changes to their future plans when you die. Some types of life insurance even have a built – in cash – accumulation feature that can help you reach savings goals. Life insurance in essence is a unique investment – effective for both protection and accumulation. But the real treasure with life insurance is its dual benefits – financial security and peace of mind.
There are many variations of life policies although the most common life insurance plans include:
Term Insurance, this is coverage for a term of one or more years. Benefits will be paid out if you die during that period. Some term insurances can be renewed at the end of the term. The premium rates usually increase with your age at each renewal. Whole Life Insurance, this gives you a lifelong protection if premiums are paid.
'Whole life insurance' plans generally come with level premiums, which means the premiums do not increase as you age. Life insurance premiums can be paid for a determined number of years, after which protection lasts for the whole of life. Alternatively, premiums can be paid out for the duration of one’s whole life.
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