"Are All Life Insurance Policies the Same?"

The other day, Tim, a resident of Boston, was browsing USAToday.com, when he came across a report titled ‘Bad news, good news: Millions need life insurance; it's getting cheaper’. The report read: “Millions of Americans have no life insurance, and millions more don't have enough to provide financial security for their loved ones. That's a shame, because if you're reasonably healthy, you can buy a lot of life insurance without spending a lot of money. Average premiums for individual life insurance have been falling about 5% a year since 2000, and they're expected to drop an additional 4% in 2007, according to the Insurance Information Institute.”

Now, Tim, who also happens to work in a Boston based architect’s firm, is a protective family man. Hence, he decided to purchase a life insurance policy. Tim searched through a directory and located a Boston based insurance agent. The next day, he was in the agent’s office discussing about life insurance. Tim’s knowledge about insurance matters was limited at best. He was under the impression that life insurance is a single entity and was never aware of its different forms. Hence he was surprised to know that there are many different types of life insurance policies available.

There are various types of insurance policies and each has its own features, pros, and cons. According to Jason Thomson, a Boston-based life insurance expert, before purchasing a life insurance policy, it is necessary for a person to assess the reasons behind the purchase and choose a policy that will cover his needs.

Take the example of Jane. She is a divorcee and has two young kids. Jane works as a kindergarten teacher in a local nursery in Boston. She wants to ensure that her children are not left penniless in case something happens to her. Since, she has a limited source of income, Jane should preferably opt for a life term insurance policy. It is the least expensive life insurance available in the market today. You are required to pay a certain amount of money as premium at a fixed interval. You will be covered for a certain duration depending upon the policy chosen by you. For instance, certain life term insurance policies offer a protection for 10 years whereas others offer a cover term of 30 years. In case the insured happens to die when the policy is in force, his beneficiaries receive the entire sum that was decided at the time of taking the policy. However, if the insured outlives the policy, he does not receive any benefits. However, he has the option of renewing the policy. Many experts feel that life term insurance is the purest form of insurance. This type of insurance policy should be opted by people who would like to provide their dependents with some kind of security but have financial constraints when it comes to paying premiums.

However, for a person like James who is looking for a policy that provides an uninterrupted cover, then you should opt for a whole life insurance. This type of life insurance policy also allows the insurer a chance to borrow loans against the policy, something that can benefit a person like James, who also operates a business in Boston. In addition, life insurance policy also offer cash value growth and in some cases the cash value of the life insurance policy is equal to the benefits that are offered after the death of the policyholder.

Then there is an option of selecting a universal life insurance policy. This type of policy is suitable for people like Susan who are looking for a life insurance policy that offers them flexibility with regards to the payment of premiums. Susan is associated with a Boston based orchestra and her income is anything but regular. Opting for a universal life insurance policy will allow this Boston based pianist a chance to fix the time and amount of premium. These kinds of life insurance policies also provide guaranteed death benefits as well as the accumulation of cash values.

Those investors who would like to have a life insurance cover as well as participate in the stock markets can opt for a variable universal life insurance. This kind of life insurance policy allows you to get a cover as well as invest in the stock markets. It is suitable for a person like Jack, a doctor who works in a local Boston hospital. Jack is not interested in earning a fixed income and would like to take advantage of a booming stock market. At the same time, he is not averse to losses that are common in a volatile market. In case of variable universal life insurance, the insurance company invests some of the premium amount in the fund chosen by the policyholder. These kinds of life insurance policies provide death benefits as well as a potential for growth.

Thus, all life insurance policies are not the same and each one has its own unique features. So, we can tell Tim, our Boston based friend to carefully review each life insurance policy and choose the one that best caters to his needs.

Find more articles tagged with: