Life Insurance is an important part of financial planning that provides a benefit to your beneficiaries in the event of your death. The benefit can be used to pay funeral expenses, replace loss of family income or pay off debts.
There are two types of life insurance: Term and Permanent. Term Life Insurance provides coverage for a set period of time while Permanent provides lifetime protection.
Term Life Insurance
You can select either Level Term and the benefit will remain level throughout the term or Decreasing Term that will decrease as the term progresses, usually in one year increments. There is also an option for renewing Term Insurance. It usually renews on specified terms such as 20 or 30 year renewable policies.
Permanent or Whole Life Policies
The death benefit is paid out regardless of when the policyholder dies. In traditional Whole Life policies, also known as Ordinary Life, both the death benefit and the premium are designed to remain at the same level throughout the life of the policy. As the amount paid out increases, it can usually be cashed out as a savings account. Universal or Adjustable Life offers more options such as increasing the death benefit or decreasing the premium payments due to changes in financial situation.
Also available for those who wish to earn a higher than average savings rate by investing in stocks or bonds with their premium payments. There is also a risk in this type of policy that will decrease if the stocks or bonds do not perform well. The benefit though, will not dip below a specified amount.
Disability Insurance covers an insured person in the event that they are unable to work because of accident or illness. It can replace a portion of your income during the time you are out of work.
Long Term Care
Long Term Care covers additional care in the event of old age, mental illness or injury. Long Term Care specifically covers the Activities of Daily Living if you are unable to do them.