Choosing the Right Type of Life Insurance Policy
Good wealth management is the result of consistent evaluation of your financial goals and objectives, as well as using effective methods to accomplish them. Life insurance, while usually overlooked as a planning tool, can provide various benefits for individuals, families and businesses.
The following are the most popular types of life insurance policies for your choosing:
Term and Permanent Life Insurance
Term insurance is typically the least expensive of all short-term insurance options, but you have to use it before the end of its term or your coverage may expire or become cost-limiting. Permanent life insurance, on the other hand, is more expensive yet provides a death benefit, no matter when you die, along with other benefits like premium flexibility and tax-deferred investing. Universal Life Insurance
The best thing about UL policies is their flexibility. For one, you can vary your premiums or lower your death benefit as necessary. It comes with a cash value as well, or paid premiums in excess of the current cost of the coverage. The cash value balance will even acquire interest according to the rate dictated by the insurance provider (based on the yield of the general account) before being invested in superior-quality corporate bonds. In time, you can use some of your cash value and use it as loan collateral while your guaranteed death benefit stays intact.
No-Lapse Guaranteed Universal Life Insurance
As long as you pay your premiums on time, your death benefit under a GUL policy is guaranteed. These policies are less expensive, considering your premiums are computed so that you make a level premium payment until death.
Indexed Universal Life Insurance
IUL policies almost identical to UL policies, except a broad market index dictates the prevailing cash value interest rate, which is subject to an insurer-determined minimum and maximum rate of return. Because these policies’ cash value balance can earn a higher rate of return, IUL premiums are often cheaper than typical UL policies with equivalent death benefits.
Variable Universal Life Insurance
In VUL insurance policies, the cash value goes right into investments like mutual funds, which set the rate of return on the balance. You also have the freedom to select your own investments but with a considerably higher performance risk.
Whole Life Insurance
A WL policy will have consistent premiums over its entire lifetime and provides guaranteed cash value accumulation. By the time the policy matures, cash value will equal the death benefit. As with UL insurance, you can also borrow against your accumulated cash value during the life of the policy. The main difference is that WL policies are not as flexible as UL policies in terms of premium, cash value and death-benefit adjustments.