Buying a life insurance product can be as confusing as any other product due availability of large variety of products. It becomes challenging to decide the amount of insurance, apart from the kind of policy one should buy. Then, everybody has its own opinion as to which could be the best life insurance policies. Though one can approach a professional reputed advisor, there is a lot of information available on the Internet to help consumers have an understanding the best life insurance policies.
It is believed that the concept of life insurance was first developed during Roman times in the guise of “Burial Clubs” as Romans thought that the dead needed a decent burial, involving profligate ceremonies in honor of the dead. In order to facilitate those ceremonies they made contributions to burial clubs. On the death of a member, the club took the responsibility of their burial and at times gave financial assistance to the family of the deceased. The present form of life insurance came into being in England in the seventeenth century when underwriters would insure people for financial benefits. Subsequently, the United States too followed the practice, leading to birth of twenty different insurance companies by 1837.
Basically, there are five types of life insurances namely, Single Premium Life, Term Life, Whole Life, Universal Life and Variable Life insurance.
On buying a single premium life insurance, the insured needs to pay the premium fee only once to get a fully paid policy. The insurance company considers it as a long-term policy and collects a one time payment.
Term life insurance policies are available with a maturity term of 1, 5, 10, 15, 20 and 30 years. Term life insurance guarantees to pay a predefined sum of money to the beneficiaries of policyholder if the policyholder dies before the expiry of the term of the policy.
Whole life insurance provides the insured lifetime coverage or till reaching an age of hundred years. The premiums are generally high as only a part of the same go towards insurance expenses and the rest gets accumulated in the cash account of the policy.
Universal life insurance is quite akin to whole life but part of premiums is invested in market instruments rather than the stock market.
Another form of whole life insurance is variable life insurance that allows you to choose where the investment part should be invested.
Specialists of Smart Money recommend term life insurance to be the best life insurance policies as it is the most economical. Males who do not smoke can have policy worth a million dollars on paying an annual premium of nearly $2,600. The policyholders need to pay for a chosen period of time. If you have dependents, you may buy a policy lasting for 20-30 years. In the absence of any dependents having an insurance policy is no more priority as the main purpose of having one is to make provision of some financial support for dependents.
Specialists at Budget Life consider it a better idea to invest in a whole life policy. They recommend investing ten percent of your portfolio in insurance policies as stock markets are rather too fluctuating at times. A whole life insurance provides cover for the entire life, irrespective of the age on death. A part of the payment that you make is invested in a tax deferred cash account. Should you decide to cancel your policy, you are eligible to get back whatever you would have paid towards your policy. This is not so in case of term life insurance. Another benefit is that you get loans against the cash value at reasonable rate of interest that is deducted from the policy in case of your death.
Term life insurance has some drawbacks. If you want to buy another policy at the expiry of the present one, you may find it difficult to get one on getting older. Another is that you don’t get paid anything at its expiry or on cancelling your policy. One would think that all the money got wasted. However, such a policy is highly affordable, leaving you with many opportunities of making alternate additional investments and get benefitted.
Yet, there are many benefits of buying life insurance. Realization of having provided for your family clearly demonstrates your love for them. Having a substantial life insurance policy can help paying debts after your death. For example, your spouse could pay the home loan in one go rather than making monthly mortgage payments. Having a policy of large amount enables the family to invest money smartly and live comfortably with the interest.
Now that you are aware of the benefits and drawbacks of different kinds of policies you can take time to decide the best life insurance policies to suit your requirements.