Life Insurance Basics; And Insurance and Annuity Calculators
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Life Insurance Basics
You do not have to pay the planned premium, but if you pay less, the benefit may be more like term insurance, which is only in force for a limited time and builds no cash value. On the other hand, if you pay more, and your assumptions are realistic, it is possible to pay up the policy at an early date.
VARIABLE LIFE – Most types of both traditional and interest sensitive life policies can be purchased on either a fixed-dollar or variable basis. On a fixed-dollar basis, premium, face amount and cash values are specified in dollar amounts.
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On the variable basis, face amount and cash value are specified in units, and the value of the units may increase or decrease depending upon the investment results. You can allocate your premiums among various investment pools (like stock, bond, money market, mutual funds and real estate pools) depending on the amount of risk you are willing to assume in the hope of a higher return.
Traditional variable life provides a minimum guaranteed death benefit, but many universal variable life products do not, and should investment experience be bad, coverage will terminate if substantially higher premium payments are not made.
OTHER COVERAGES – Variations on the Basic Plans
Credit Life Insurance Although you can obtain credit life insurance (term) as an individual, it is usually sold on a group basis to a creditor, such as a bank, finance company or a company selling high priced items on the installment plan. The policy generally pays the outstanding balance of the debt at the time of the borrower’s death, subject to policy maximums. Debts covered in this way include: personal loans; loans to cover the purchase of appliances, motor vehicles, revolving check loans; mortgages loans; etc.
When you borrow from an organization that has a group credit life policy, the organization may require you to purchase credit life insurance or it may simply offer the protection as an additional service. In either case you must receive a certificate of insurance describing the provisions of the group policy and any insurance charge. Generally the maximum amount of coverage is $220,000 for a mortgage loan and $55,000 for all other debts. Credit life insurance need not be purchased from the organization granting the loan.
Modified Life Plan A modified life plan is similar to whole life except that you pay a lower premium for the first few years and a higher than regular whole life premium in later years.
Joint Life and Survivor Insurance Joint Life and Survivor Insurance provides coverage for two or more persons with the death benefit payable at the death of the last of the insured.
Endowment Insurance Endowment insurance provides for the payment of the face amount to your beneficiary if death occurs within a specific period of time such as twenty years; or, if at the end of the specific period you are still alive, for the payment of the face amount to you.