Reader’s Question:

My parents told me to get a life insurance policy for myself but I do not know which one is suitable for me. Aside from the term life insurance what are the other types of cheap life insurance cover?

Rachelle Anderson

Alabama

Actually, there are only two basic types of life insurance policies. One is the temporary type, and the other one is permanent.

Under the temporary life insurance policy, or what is more popularly known as term insurance –and even for most cases simply called or termed as the “life insurance” — the insured individual will have to pay premiums within a specific term for the main goal of securing finances when he or she dies. The term life insurance that is defined here has actually no cash value or savings value. It only has a death benefit for the written beneficiaries. Many term life insurance policies that are out in the market are renewed annually because of the incidence of deaths increasing per year.

On the other hand, the permanent insurance policy has two components –the cash value and the death benefits. The cash value is how much the face value of the said policy is as years go by. In this kind of policy, the client may surrender his or her insurance policy and he or she will be given a cash equivalent of the years he or she has paid. An example of this kind is the whole life insurance policy, where the premiums paid actually earn dividends. This, in effect, will yield higher cash value the longer you pay your premiums. It can be stopped only when the policy holder can no longer pay for the premiums.

Since you are young, both of these can actually work for you. If you choose term life insurance, you may have a cheap life insurance cover every month or every year, since you will start as early as now. If you choose permanent life insurance, you will have a higher cash surrender value when you get older. Actually, for some, they choose both. They choose term for the death benefits and get a permanent insurance policy so they can force themselves into saving some money for their future, instead of spending them all.