Understanding the life insuranceBy George C (www.finance-database.com)
You may have a question of whether you need to buy life insurance. You may also want to know more about different kinds of life insurance. This article will give you a guideline.
The purpose of buying life insurance
Some of you may have the same experience like that: An insurance agent comes to approach you, and ask for your willingness to buy a life insurance. You may not feel comfortable to refuse him. On the other hand, this wakes you up with a question. You might ask yourself whether you need to buy life insurance. It is a big decision in the life time. You should first understand what the purpose of life insurance is.
The purpose of life insurance is simply to replace income for your dependents. Like most of the other people, if your income is necessary to support your family, if you died suddenly; your life insurance would then be able to provide financial support to your dependents continuously. This concept is very simple. However, you may feel confuse of many different kinds of life insurance in the market. You may be afraid of choosing a wrong type of insurance, which results in over-insured, under-insured, or even it is a plan totally not suitable for you.
In order to avoid getting the wrong type or amount of insurance, you must first have an understanding on the basic types of life insurance.
Types of life insurance
Basically, there are two main types of life insurance: the term insurance and the cash value insurance.
The term insurance is a pure insurance. It is the most basic form of life insurance. When buying that kind of insurance, the premium that you paid will cover you for a certain period of time. If you die during that covered period of time, your beneficiary will collect the money which was specified in the contract. If you don’t die in that period of time, there is no money back. You have to pay another premium if you want to renew the contract.
For the cash value insurance, it is equal to: term insurance + savings feature. In that case, beside the premium of the term insurance, you will pay the insurance company extra money. They will invest that money to other financial tools on behalf of you. You can withdraw this saving money in a certain period of time. It depends on the terms in your own contract. If unfortunately, you die; your beneficiary will receive the term insurance and also the savings account.
Who need life insurance?
You should ask whether you need a life insurance before choosing a particular type of insurance plan. Remember, the purpose is to provide a stable income for your family or dependents continuously. If you don’t have any dependent, or your family already in financial freedom, then you may not need to buy life insurance.
With great interests to many aspects of knowledge in the world. Hope to do something to contribute to the society
George C (www.finance-database.com)
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