Advantages and disadvantages of life insurance

The insurance of life for many is a necessary evil. Many policyholders are sure to protect their families in case of loss of income and heavy debt obligations in the event of an untimely death. With different types of life insurance in the market, generally speaking, two varieties are the most popular: term and whole life, or life insurance “cash value”. Both varieties have their advantages and disadvantages.


Life insurance cash value are policies in which premiums are used to pay the cost of insurance, while a portion is placed in investment instruments attached grow over time. Some life insurance products to value popular cash include variable life insurance, whole life, universal life insurance paid. Despite minor differences, these insurance plans are essentially the same. All life insurance policies cash value include a death benefit and cash account that is added when a customer makes a payment of the premium. The term life insurance is significantly different from its equivalent value in cash. The term life insurance does not contain a cash value account. Premiums are only used to pay the cost of coverage. These raw maintain the level of coverage of a specific “term”. At the end of time a policy, a new policy must be purchased.


Both life insurance cash value and term life insurance has its benefits. The most important benefit of life insurance cash value is its ability to provide coverage for the entire life of the insured. Many people take advantage of buying this type of insurance when they need when they are young. Accounts cash values ​​can also be borrowed against or removed during the life of the policy. Policyholders are not required to pay taxes on interest or attached to the accounts of cash value gains. Individuals and businesses also benefit from term life insurance. The biggest advantage of term life insurance is that premiums are usually very cheap, especially when the person is young and healthy. It is possible, in many cases, significant buying large quantities of nominal value with a monthly cost of US $ 20 to US $ 30. The term life insurance is good to meet the financial obligations that will eventually end, as mortgages, car loans and the cost of education.


With the benefits of both life insurance cash value and term life insurance are some disadvantages. The most significant life insurance cash value disadvantage is the lack of consistency in premiums. Most cash value policies contain required premiums may increase over time. This can make quite expensive for people who depend on a budget who wish to purchase enough coverage to benefit your family in case of his death policy. Although many of the policies contain clauses that dividends from cash accounts can be used to pay the premiums, this situation almost always results remove funds from the cash value or investment account. Also there is never a guarantee that sufficient funds will be available to cover losses in premiums if an insured is delayed. There are also several disadvantages of term insurance, the first that is not permanent. Although an insured can enjoy very cheap raw when young, term products expire after a certain number of years, or when the insured reaches a certain age. When a policy expires, a new must be purchased. This means that in order for coverage to continue, the person should be entitled to a new program based on your current age and health. Often, this results in higher premiums or the person is no longer capable of being secured. However, some term insurance contain options “renewal” that do not require proof that the client is insurable to continue coverage.


When you think about life insurance, you think of a death benefit paid to a beneficiary upon the death of an insured. While this is true, it is important to know that some insurance, especially many of the policies cash value, it is often not so simple. With many life insurance policies with cash value, a single payment is made after the death of the insured, regardless of what it’s worth the cash value account of it when it dies. For example, if a person has a whole life policy with a death benefit of $ 100,000 and a cash value account worth $ 25,000, it is common for beneficiaries expect a payment of US $ 125,000. This is usually not the case. In this example, a beneficiary usually only receive a total of US $ 100,000. Because the cash value account is worth $ 25,000, the insurance company will only pay $ 75,000 as compensation for death, with the other $ 25,000 from the cash value account. For some products, however, the beneficiaries are, in fact, the right to receive death benefits in addition to cash securities accounts when their loved one dies. However, usually an amount equal to the nominal value of the policy is paid with death. It is important to know this information before buying the cash value life insurance.


It is recommended that you consult with an experienced insurance agent before buying life insurance. It is important to find a product life that is tailored to the specific needs of the individual policy and your family. For example, it may be that a person only has to protect his family from the great mortgage bonds for 10 or 15 years. If a person wishes to be covered by a policy for the rest of your life, then a cash value policy can be fine. Consider whether the use of life insurance as investment vehicles is a wise move for you. In the long term, it may be more cost effective to buy certain time and take advantage of low premiums and then invest in mutual funds or stocks that are not linked to insurance policies.