Life Insurance is one of the Foundation stone of any sound Financial planning be it long term or short term. Nobody wants to think of uncertainties in their day to day life . All of us are so busy planning our future and trying our best to fulfill our dreams like buying our dream house , dream car , starting a new business , making plans for arrival of a new member in our family( our bundle of joy) etc. The thought of purchasing a life insurance policy doesn’t strike our mind . The importance of purchasing a life insurance becomes very vital with every new plan or addition of a new family member . Life never works exactly as intended. Crises can strike anyone at any point of time and in case of premature death the financial hardships that will be caused to our loved ones is undreamed-of. No amount of Life Insurance can replace our loved ones but buying a Life Insurance will help you deal with its Financial repercussions. Life insurance plays an important role when plans don’t work out as expected. Get FREE low cost insurance quotes online.
Term insurance is a Temporary Insurance which covers your risks for a shorter period of time .Under Term Life insurance, the insurance company promises to pay death benefit if you pass away within the period specified in the policy. With term , you sign a contract for a specific amount of time and pay premiums for that length of the contract .When the contract ends , so does your coverage. Premiums in Term Life are usually not high and depend on the age, sex, health, smoking habits and coverage of the insured.
Permanent Insurance covers you for life (as long as you pay the premiums ).Your risks are covered for a longer period of time . The main advantage of purchasing a permanent life insurance is that you can build up some cash values in permanent policies ;upon cancellation of the policy you can be rewarded with cash . Permanent insurance is a good choice for you if you can comfortably afford the premiums, and if you want to ensure that you have a life insurance policy in place for your entire lifetime. In addition, whole life insurance may be used as a part of your estate planning.
Term Insurance v/s Permanent Insurance
- Term Insurance is like renting a home while Permanent Insurance is like owing your home.
- Your premiums rise with your growing age in Term Insurance while in Permanent Insurance your premiums are usually fixed or levelled.
- No equity or savings on premiums in Term Insurance while You get a cash value back on Permanent Insurance policies.
- Term Insurance is temporary while Permanent Insurance is throughout your life .
- Premiums are cheaper in Term Insurance and can be renewed but premiums are relatively higher in Permanent Insurance.
Note :- when you buy Term insurance make sure it is both Renewable and Convertible
Universal Life Insurance
Universal life insurance is like buying a permanent insurance and investing money at the same time in the same form of insurance .In Universal Life the premiums you pay would go into a holding account and the insurance company would invest that money in other investments or funds. This money is tax free and you can also take loan against this amount. The company includes in your contract a minimal guaranteed interest rate on the money in your account. The investment inside the policy grows tax-deferred , and can potentially be tax – free.
The advantage of Universal Life is that if you have surplus savings, you need not pay the premiums. It is important not to minimum – fund your universal life insurance policy in the initial years i.e. in the first seven years .when you overfund the policy the savings accumulatedwill be used as your premiums. However, if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage could end. Hence there always needs to be sufficient money in the account to take care of the premium payments. If you are looking for insurance coverage along with investment, then Universal Life could be the best option.
- You can increase or decrease the face value of insurance
- You can add additional lives insured (subject to their insurability)
- You can substitute one life insured for another (subject to their insurability)
- You change the amount, timing, and frequency of deposits
- Universal life insurance is more flexible than any other product .
- The cash accumulated in a universal life insurance account allows for greater wealth accumulation than taxed investments. (Conditions apply)
- It is expensive as compared to other insurance policies.