A common question among people these days is which is the best life insurance plan for me. The answer is dependant upon what you would like to the policy to do for you, or for your surving family members. Life insurance comes in several forms and each form does something a little bit different then the other forms. To fully understand which is the best life insurance for you requires that we take an endepth look at all three catagories of life insurance. As mentioned, there are three basic types of life insurance policies from which consumers can choose. Thoser three policy types are Term life, Whole life insurance, and Return of Premium Insurance.
Best Life Insurance-Term Life Insurance:
Respectfully, term life insurance is better known as the cheapest of the three types of polices. This is a dark horse policy because it it taken out for a specific cover range within your life. The word term means a span of time. This is a policy is taken out to cover your life for a specific time. Many people take out term life insurance as a means of preventing the unthinkable of destroying the life you built. A good example of why term life insurance works well for many people is as follows. You are 25 years old, a married and expecting your first child. You decide to take out a 30 year term life insurance policy for $200,000. The rational for taking out this policy is simply to make sure your family is taken care of during the next 30 years of your life. As a family man, you have worries about leaving your wife and child behind to defend for themselves. At 28, you and your wife have another child and you increase your coverage to 500,000. If you were to pass on to some greater reward during this 30 year period, then your wife or beneficiary would be paid $500,000. That chunk of money would help pay for the home you were buying, and help to pay for your childrens college education, etc. A term life policy takes the burden of loss away from the surviving spouse and children. At the end of that 30 years you are know 55 years old and the policy comes to an end without paying you a cent. The burdon of your life has passed and the kids are grown, your house is paid for, you and your wife have savings and retirment to look forward to as a means of sustaining you.
The biggest problem with term life insurance is that it expires and the investment expires with it. This is what it is designed to do. It works to elieviate your financial responsibililty if you should pass away during the time period that the policy is written for. It is a double edged sword in that if you die it is beneficial, but if you survive, then it is money that shows not return on investment. Given the circumstances of your life, this may be the best life insurance for you.
Best Life Insurance-Whole Life Policy:
Whole Life Insurance is without a doubt the most expensive of the three life policies being reviewed here. They are also very confusing. They are however, permanent so long as you keep paying the policy premium each month. Whole life insurance policies come with several benefits. First, they offer a tax free investment type opportunity. The payout is also tax free. The whole life policy also allows the holder to establish a cash reserve that can be tapped into without a tax penalty. The draw back is that any money that is withdrawn is deducted from the value of your policy. While these policies sound like wonderful tax free havens for investment, they really are not. Top analysist predict a maximum return on investment of only 4-5%. The money is not specifically tax free as is the case with a 401K type plan. This is becuase you are taxed on the money as you earn it while with a 401K plan, the money is taxed later. A word of caution with whole life policies. These policies are often compared to a 401K savings plan when in fact they are not very similar at all. The best benefit of these policies is that so long as you pay the premiums they will cover you for life. If leaving something behind for your beneficiaries is important then this may be the best life insurance policy for you.
Best Life Insurance-Return of Premium:
A return on premium life insurance plan combines a little bit of each of the other two insurance policies to offer consumer something that returns a payment regardless of the outcome. Return of premiums are structured like a term life plan in that they cover a specific period of time. They are not as cheap as term life policy but they are also not nearly as expensive as a whole life plan. The benefit of a return of premium policy is that it provides coverage for a period of time like term life policies do but if you outlife the policies term then all of the premiums that you have paid in are paid back to you. The down fall is that the insurance agency will keep any interest that is made from your policy premium payment. The return of premium may be the best life insurance for you as a consumer.
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