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A couple of years ago, on the advice of a financial advisor, I purchased a life insurance policy and it seemed like a good idea at the time. Little did I know that there were so many terms and conditions that were applicable when it came to payment schedules etc. It’s taken me a while to understand the different types of life insurance policies actually available in the market.
Just this morning, a friend of mine in the US told me that she was using a company called Aptus Insurance to get life insurance quotes online and then compare them against the various ‘types’ of life insurance policies on offer.
I’ll give you a quick summary since I’m no expert on the field but I suppose it’s important for all of us to at least be aware of what is out there :
- Term Life Insurance: it’s considered as short term insurance because the policy is only effective for a specific period of time, i.e. a year. It also needs to be renewed each year.
- Permanent Life Insurance: offer both a cash pay-out and built in savings plan; and also offers many tax benefits.
- Whole Life Insurance: is similar to permanent life insurance, and is generally a cheap and simple style of taking insurance.
- Single Premium Life Insurance: basically you make a lump sum deposit payment and do not have to make premium payments for the remainder of your policy; and this type of insurance can also be used as a collateral against a loan.
- Universal Life Insurance: is similar but more flexible than whole life insurance. You can choose how much of your premium goes towards your policy and how much goes into your interest gaining savings account.
- Variable Life Insurance: is the most robust and flexible policy available with a guaranteed minimum pay-out.
Wow ! That’s a lot of different types of life insurance ! Of course every country and insurance provider has other types of policies also available but like I said – this is just a gist.
I know most people my age haven’t even given a thought to life insurance policies. I’m fortunate that my parents have secured my future by having purchased the relevant policies. That also means that they have thought about how to provide my siblings and I with financial stability after they die ! My parents have obviously planned well in advance; but with me turning 30 in a few months – I’ve not even thought about securing the future of my going-to-be children. Sometimes I wonder how we as the new generation will survive ?
Whilst browsing around, I came across the Insurance Information Institute which has a plethora of information that helps one understand what types of insurance are available and what they all incorporate. Do check it out when you get a chance.
What are your thoughts on the subject ? Have you got your life insurance sorted out or have your parents done that for you ? Do you know if your parents / guardian has taken out a life insurance policy for you? If you don’t have any life insurance, how likely are you to take a policy ?
I realize none of us want to think about death – but it is inevitable and we should start thinking about whether ‘our death would leave anyone in financial difficulty?’ … if the answer is yes (and it could be your spouse, partner, family, siblings, even children) .. then I suppose its time to look into getting some Life Insurance !
Further Reading
- Are You Protected Enough ? in Business Today
- For the Recently Widowed, Some Big Financial Pitfalls to Avoid by Ron Lieber for the NY Times
- Tracking Down and Collecting Unclaimed Life Insurance by Paul Sullivan for the NY Times
- Consider Keeping Life Insurance by Anne Tergesen for The Wall Street Journal
- Scared to Death of Life Insurance
