Life insurance has gone through many transitions through the years. Where once, whole life insurance was the main type of coverage, we now have several options in the life insurance industry. The main types available to healthy clients are term life, universal life, whole life, variable life and variable universal life. There are life insurance products available to those who are uninsurable, called graded life.
Term life, often referred to as “renters insurance”, is the simplest type of coverage. The client will pick the face amount of death benefit they desire, and the length of time they want coverage. When the time frame is gone, their coverage is gone. There is no cash build up in term policies, but several do have conversion privileges through the life of the policy. Just like the term life insurance Singapore, our partner company helps their clients to convert the term policy to a permanent policy with the health rating you received at the time of the original policy, but with the premium of your attained age at the time of conversion. Many clients take out a term policy because of affordability, and then convert to a permanent policy at a later age when they can better afford the premium.
Whole life insurance comes in two different types. Straight whole life or variable whole life. Both policies develop cash value over the life of the policy, and the amount of the value is determined by how well it is funded, and performance of the existing value. Both straight and variable whole life have fixed premiums with each payment. The main difference is that in the straight whole life, the cash value is placed in fixed interest vehicles, with a guaranteed minimum interest. The variable whole life places the cash value in a separate account, which is market driven gains. You may have a better chance of growing the internal cash value at a much faster pace, if you don’t mind having the risk of the market.
The newest of the types of life insurance are the universal life products. These are a permanent insurance, as long as they are funded properly. The premiums can be flexible, which works better for a lot of people, young and old. It is a lot like the whole life policies, except for the flexible premiums. Universal life is supported by the fixed interest vehicles, while the variable universal life is supported by market accounts internal in the policy.
A graded benefit policy is for those that are uninsurable. For the first two years of the policy, the client pays premiums, but only has full death benefit if they were to die of an accident. Death due to illness will result in the premiums that have been paid will be refunded to the beneficiary if the individual, plus a set amount of interest. These are usually small face amount policies that allow an individual to have some sort of final expense coverage in place.
Life insurance is a valuable tool in planning for all types of scenarios, and is actually cheaper today than it was twenty years ago. Life expectancy is longer, so premiums are lower. It is always good to review your policies you have in place at least yearly to make sure they are performing as needed. Life insurance is normally not for the policy holder, but for the loved ones left behind in case of death. Make sure you have properly planned for all possibilities.