Best Life Insurance Policy?
Reader’s Question:
I heard from a friend that cash value policy has 4 different types. How will I know which is the best life insurance policy for me?
Uma
Little Rock, AR
Unlike the term insurance policy, a permanent life insurance has a cash component. However, this cash component can be used depending on the type of permanent life insurance. You can make a decision on which type of insurance to purchase according to your needs.
The whole life insurance is the most basic type of permanent life insurance, which provides a level premium and guaranteed earnings rate on the cash value and benefits. Dividends earnings is also possible depending on the performance of the company.
Universal life insurance on the other hand is flexible in terms of premium payments. After your initial premium payments, you can vary the amount of payments. You can pay more in case you have extra payments or pay less or skip it if you don’t have enough. You can also pay at anytime you want. However, your policy could lapse if the company fails to perform as expected or you fail to pay enough premiums. There are new policies of this type that guarantee that the policy will not lapse. You can explore this option with your
insurance agent.
Variable life insurance is considered as one of the most risky type of permanent life insurance policy.The company allows the policyholder to invest its premium. If the investment performs poorly, death benefits and cash component will decrease. If, on the other hand, the investment performs well, these two will increase.
The combination of variable and universal life insurance policy creates variable universal life insurance policy. This is the most flexible type since the coverage amount and the payments may vary. It can also be risky because of the component of investing the policy premiums.
Depending on the type of permanent life insurance you want, the cash value component of a policy can work differently and be used for different. There are four main types: universal life, whole or ordinary life, variable life, and variable universal life. Variable universal life insurance policy can be
risky or predictable based on how it is used.
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