Equote - David Livingston

People always procrastinates purchasing a life insurance policy. They dont take it seriously until a death will occur in the family or close to home. It makes them realize that life insurance and term coverage are indeed important. Only then they will purchase one. A person could have prevented wasting his/her hard-earned money by purchasing a life insurance policy at an earlier age. 

The first thing that people must first know about life insurance is its importance. If you know that your family or anybody close to you will suffer financially because of your death then you know that you need to have a life insurance policy. A life insurance policy assures your family or the people you leave behind with replacement income after you have died. It lessens the financial burden that they will have to endure as they go on with their lives without you. 

There are two types of life insurance policies that people can choose from. The term life insurance policy is strictly giving you life insurance coverage with no investment options at all while the cash value life insurance policy has a savings plan bundled in with your life insurance policy. From the looks of things, you might think that having a life insurance policy bundled in with savings or investment option is a mighty fine deal. However, we should first look deeper and see the advantages and disadvantages of these two types of life insurance.

Term life insurance is the oldest form of insurance. Only within the last century was the cash value or the universal life insurance introduced to the public mainly because of the increased need for personal retirement planning and also mainly due to misguiding insurance agents who get 5 to 8 times more in commissions than those that are selling low cost term life insurance. Keep this in mind when you are being sold a cash value policy. Many cash value or universal life agents will convince you that a savings option bundled in with your life insurance is the best way to go. However it is not always the case depending on the prevailing economic indicators. A universal life insurance policy or a cash value life insurance policy is basically a long term life insurance policy with bundled in investment options. 

Cash value is 3 to 6 times more expensive than term life insurance. Take for example a whole life insurance policy that will make you pay out $250/month. In this amount, you will get a total of $200,000 life insurance coverage and a cash value of $50,000 at the age of 65. This may look like a very good deal but let us dig deeper. There are a lot of term life insurance quotes that will give you $600,000 in life insurance coverage for only $108/month. This is far less expensive than the $250/month quote of cash value insurance. With this, you can still invest the remaining $142/month in a mutual fund at 12% which will give you a lot more than $50,000 when you reach the age of 65. This is if you start your term at a very young age. 

Another problem with cash value insurance is: the amount of money from your premium payments that goes to your insurance increases while the amount that goes to your investment decreases. This means that at a certain age, say at 65, no money is being placed in the investment options since the entire amount of your premium goes to your life insurance coverage. 

This is entirely different for a term life insurance policy especially if it is the level type. In a level type term life insurance policy, the premiums you pay will not change and the amount of life insurance coverage will remain the same throughout the entire term. 

There is one more type of insurance that should be mentioned here. That is the no medical exam term life insurance which is actually only an accidental death insurance. This may be the cheapest in terms of premium payments but has only minimal coverage.