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Types of Life Insurance

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What Kinds of Life Insurance Are There?

What do you need to know about life insurance?
You need to know that there are several kinds of policies that may be available to you, if you are healthy enough.

Term life insurance policies provide life insurance protection for a specific period of time or term. If you die during the coverage period, the beneficiary named in your policy receives the policy death benefit. If you don't die during the term, your beneficiary receives nothing.

Permanent insurance policies provide insurance protection for your entire life as long as the policy remains in force. In addition to the insurance protection provided, this type of policy also builds internal cash values, often described as a savings account within the policy.

Below is a list of the different kinds of permanent insurance policies:

  • Whole life
  • Ordinary level premium whole life
  • Limited-pay whole life
  • Current assumption whole life
  • Variable life
  • Adjustable life
  • Universal life
  • Variable universal life
  • Joint life (first to die)
  • Survivorship (second to die)

You also need to know that the cost of life insurance will depend upon the type of policy, your age, and your health.

A life insurance contract is made up of provisions, options, and riders. Provisions describe or explain features, benefits, conditions, or requirements of the contract. Options are features of the agreement that require you to make a choice regarding some aspect of coverage. Riders are additional coverage (or endorsements) offered by the insurer at the time of application and added to the standard agreement in return for an additional premium.

Finally, you need to know the tax consequences of owning life insurance.

  • Life insurance premium payments are not tax-deductible expenses.
  • In general, the death benefit paid is income tax free to your beneficiary.  You must be very careful about who owns the policy and who the beneficiaries are, in order to avoid estate taxes on the proceeds when you die.

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