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Life Insurance FAQ (Frequently Asked Questions) When it comes to life insurance there is a lot of “mystery” sometimes from what people think that it is or isn’t. So we’ll examine some of the most FAQ’s of the FAQ’s.

What exactly is life insurance?

Life insurance is a type of financial resource that leaves behind resources for your family or anyone else named on the policy should you happen to die. The amount of money is issued in the policy and you pay a premium based upon that amount and other factors; such as, your overall health, your age, your occupation and more.

The other thing that can affect your premium is if you have a cash buildup in your life insurance policy. This is if you purchase a policy that will accumulate cash through an extra premium payment invested through the insurance company and is on a tax deferred basis. The cash that is built up in this way doesn’t have to only be paid out upon your death but can also be used for your needs in the future; such as:

• Supplementing your retirement income
• Your children’s college education
• Other need

What is term life insurance?

When it comes to insurance coverage the term life insurance is going to be the least expensive. The policies do not carry a cash buildup though; it’s a fixed term policy and is considered a risk only policy just like your auto or homeowners insurance.

The policy, upon your death, will pay out a fixed amount of money as long as your death occurs during the policy term. The term life insurance policy can usually be renewed; however, if you have a lot of health changes, as well as age in general your premium is likely to go up even for the same amount of coverage.

What is whole life insurance?

Whole life insurance, unlike term life insurance, provides both protection and a cash value to the policy. The premium payments are going to remain fixed for the entire duration of the policy so long as you make your payments on time and keep the policy current.

The cash buildup is paid out as a dividend to the policyholders through a lot of companies. The payout and cash buildup can provide flexibility as well as more value to your policy. You can actually buildup a fairly significant cash value through your life insurance policy.

There are a lot of people that are going to prefer this type of insurance policy if they can afford the premiums as it will help you when you’re alive, not just others when you are dead. It can supplement your retirement fund and also help to pay for your child’s education. It’s your money, use it as you need.

The one thing to keep in mind in case you’re going there, a life insurance policy can’t be purchased just for the sole reason of a cash accumulation policy. It’s a protection policy that just happens to have some added benefits. Any withdrawals upon your life insurance policy will reduce the payout upon the death benefit payout.

What is variable life insurance?

Variable life is a policy for the people that want to put their insurance policy in the hands of the insurance company which will ride the performance of the financial market. You’re going to make the decision on how the net value of your policy is going to be invested. Although you have the chance of increasing your cash value a lot faster it doesn’t come without having some risk. If the market has a downturn you’re going to lose money on your policy and could end up having to payout additional premium in order to keep the policy solvent.

Just as with the whole life policy you are able to make withdrawals against the cash value of your policy at any time. You’ll want to make sure about any fees with making any withdrawal transaction. A variable life insurance policy is going to be sold with a disclosure document that you should be sure to read very carefully.

Final Thought

There are a lot of considerations when it comes to purchasing your life insurance policy and we just covered some of the basics. When you’re making your final decisions just don’t contact a life insurance agent to purchase a policy, use them for questions too.