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Life Happens’ industry development program declared September “Life Insurance Awareness Month” in 2004. The goal of Life Insurance Awareness Month is to teach the public about the importance of life insurance and how it may serve as a solid financial basis for a household.

Reasons People Buy Life Insurance

Life insurance should have a goal or justification, just like purchasing any other financial item. Among the reasons people have for getting life insurance are to:

  • Ensure the identified recipients’ financial security.
  • Make provisions for estate stability, heirs’ equitable distribution of inherited assets, and transfer of wealth.
  • Provide money to pay off a particular obligation, like a mortgage.
  • Comply with the demands of a divorcing spouse.
  • Invest in something, for instance, a life insurance policy with premiums paid.

Individual Life Insurance Policies: Types

There are two kinds of life insurance plans. However, these two main kinds of life insurance plans may be distinguished as follows, and we’ll go into more detail about all of them. We’ll start with individual versus group-sponsored life insurance plans.

Life Insurance for Individuals

A person applies for a personal life insurance policy from an insurance provider that provides such policies. In the same way, the person must probably accept insurance since, along with other factors, the insurance provider will scrutinize the person’s medical records. The person almost certainly has to undergo a medical exam.

A Life Insurance Policy Sponsored by the Group

Permanent workers of an employer are entitled to join a life insurance plan at the time of hiring, which the company sponsors. The FEGLI program of the federal government is an instance of a group-sponsored life insurance plan. A group-sponsored life insurance plan is a “guaranteed issue,” meaning that anybody seeking coverage is not required to provide proof of insurability. All potential workers, regardless of age, gender, or smoking status, are welcome to apply. There are no medical examinations or records of specific patients checked.

Comparison Between Permanent and Term Life Insurance with Money Value

Term Life Insurance

Term life insurance provides complete defense (in the form of a death benefit) from monetary loss brought on by a decedent’s passing within a certain period. When a person needs life insurance for a short time—less than 30 years—term life insurance is often the most suitable and significant investment. In summary, term life insurance provides the most significant level of protection at the lowest cost (premiums). It is not intended to cover a long-term requirement for life insurance.

A Monetary Value and Permanent Life Insurance

The term “permanent” (also known as “cash value”) refers to life insurance that does not expire as long as the payments are paid and the insurer does not switch from one cash-value life insurance policy to the other.

The three main categories of permanent life insurance plans are Whole, Universal, and Variable life insurance and are described.

  • Whole Life Insurance 

For the duration of the insurer’s life, this policy offers death benefit protection for a fixed premium. A “straight line” policy is another name for a whole life insurance policy. A part of the premium is invested at a predetermined rate of return, which allows the policy to save money.

This has a cash balance fund that grows tax-free as long as the policy is in effect and is combined with term life insurance to provide death benefit protection with universal life insurance. In the case of a universal life insurance policy, the insurance provider subtracts certain costs, including the first month’s premium payment from the death benefit.

The remainder of the premium is invested in a cash-value fund, which is often a high-yielding government securities fund and receives interest at the market rate. The cost of an extra month’s death benefit plus expenditures is taken from the cash value fund each subsequent month.

  • Variable Life Insurance

Variable life insurance combines the benefits of tax-free deferred savings with the growing potential of stocks. Variable life insurance products provide set premiums and a guaranteed death payout, much like standard life insurance.

Contrary to other cash balance life insurance plans, such as whole life, the financial value of an insurance policy is not guaranteed and will vary according to the success of the investment portfolio that the policyholder has chosen.

Contact Information:
Email: [email protected]
Phone: 5099875559

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