Life Insurance: Term, Whole And Universal

When creating a financial portfolio, one common piece of the portfolio commonly forgotten is the basic fundamental life insurance policy. With so many options and varieties of life insurance on the market, individual investors are often left confused and frustrated as to what type of life insurance they should purchase based on their personal and financial goals. Just as each individual investor has unique portfolio, so are the varied life insurance policy options.

Life insurance is key financial vehicle that should be part of every individual investor’s portfolio. With options varied, life insurance can be purchased in terms, can be purchased to expire at a specific age, can be classified as “whole life” coverage, and can even be, what is called, a universal plan or a plan assigned to a specific illness. The type of coverage purchased will depend, largely on the anticipated financial status of the individual investor both at the time of purchase and what is anticipated to occur with age.

In life insurance plans which are established for a specific number of years, i.e. 10 years, five years and even one year, the plans usually expire at age 75. The success of the term life insurance coverage lies in the benefit amount remains level, without increasing or decreasing with age, and premium amounts remain intact provided the individual holds the policy for the full benefit period without missing a premium payment. You can also look for life insurance online quote for a better understanding of your premium rate and policy details.

As an alternative to term life insurance, an individual investor may opt to purchase what is known as whole life insurance. Under a whole life insurance policy, the benefit level remains consistent for the term of the policy plan and premiums may either remain consistent or fluctuate depending on the terms of the policy. The advantage to whole life insurance plans lies in the cash value component. As an individual investor, the cash value component of the whole life insurance policy provides for a cash value upon a specific maturity date should that date arrive before the time of your death.

In addition to whole and term life insurance, there is a growing interest in a life insurance plan known as a universal life insurance plan. Under a universal life insurance policy, the benefit level selection can be one in which the benefit remains consistent or a policy in which the benefit level gradually increases over time. Under the universal life insurance policy, the policy is linked into a mutual fund providing a rate of return which is reinvested into the universal life policy on a tax deferred basis. The advantage to universal life insurance is in the insured’s ability to move the benefit level and premium payments on an as needed basis with coverage remaining in force until the time of death. In other words, there is no specific time frame attached to the universal life insurance policy.

As with any investment tool, education is paramount. Understanding the benefit levels, premiums and interest options will provide the individual investor with the information necessary to make an educated decision in one of the most important aspects of the financial portfolio; life insurance.