If you are new to buying any type of life insurance, you will need to know how it works and have a good understanding of the types in order to choose the coverage that will be best for you and your family. If you are in Naples, FL, the team at Progressive Insurance Agency, Inc. is standing by to help you.
In essence a life insurance policy is basically a contract between you and the insurance company. You make payments on the premium and in exchange for that, the insurance company will make a lump sum payment – aka a “death benefit” – to your beneficiaries when you, or the insured party, dies.
In a typical situation, the life insurance type will be determined by the goals and needs of the policy owner. The type known as term life insurance will provide the protection only for a specific amount of time. The more permanent type, like whole or universal life insurance, provides coverage for a lifetime. One more thing that is important to know is that the death benefits from life insurance policies are typically tax free.
Term Life Insurance
This type is typically less expensive than the permanent types of life insurance. It is designed to offer financial protection for a set period of time – usually 10 or 20 years. The premium will remain the same for the length of the coverage period. Once the coverage period is up, you can generally renew the policy at higher premiums.
Whole Life Insurance
This is one of the permanent types and has been designed to provide coverage for a lifetime. Because of this, the premiums are typically higher. The premium payments are usually fixed and the policy actually has a cash value – which means that it can actually function as a savings component.