Meet Ava. Ava has been through
an incident that made her think about purchasing a life insurance policy.
But wait. She knows nothing about life insurance! Let alone
what type could be the most suitable option. Stick around till the end of this video if
you are like Ava would like to know more about what life insurance is and what types
of life insurance are offered in the US. So, let’s start with the basics, shall we?
Life insurance is a contract between an insurer and a policy owner.
During the lifetime of the policyholder, they pay for premiums in exchange for their beneficiaries
to receive a specific sum of money known as the death benefit after they pass away.
Beneficiaries are most commonly the family of the policyholder.
A beneficiary can also be a company. But let’s talk about that in another video.
The policyholder needs to be sincere about their past and current health conditions
or they may risk breaching the contract with the insurance company and the beneficiaries
losing the right to the death benefit. Other activities that are considered high
risk should also be disclosed. While I have your attention,
do you mind hitting that subscribe button and bell button to join our notification squad?
Thanks! Now let’s take a quick look
at different types of life insurance policies. There is a variety of options out there depending
on the different needs or even preferences of the policyholder.
The biggest choice you need to consider is whether you are interested in
temporary or permanent life insurance. Term life lasts for a certain number of
years while permanent life insurance covers the entire lifespan of the policyholder.
In term life, you can choose between 10, 20, or 30 years of coverage.
It's an affordable option and that’s why people like Term life insurance.
On the other hand, permanent life insurance covers the insured person’s entire life.
That’s assuming that the person does not stop paying the premiums or surrender the policy.
There are many options you can choose from in both types of life insurance.
Term life can be either decreasing, convertible, or renewable.
Decreasing term life insurance offers decreasing coverage over the life of the
policy at a predetermined rate. Convertible Term Life Insurance
provides the option to convert a term policy to permanent insurance.
Renewable Term Life Insurance is renewed yearly and provides a quote for the
year the policy is purchased. The premiums increase annually.
This option starts as the cheapest option but increases over time.
Now let’s look at the types of permanent life insurance.
You can choose between whole life,
universal life, indexed life, and variable universal life insurance.
Whole life insurance allows you to accumulate cash value.
This cash value can be used for many purposes including loans, a source
of cash or even to pay the policy’s premiums. Similarly, the universal life has a cash value,
but this cash value also earns interest over time.
Flexible premiums that can be adjusted over time are also an
extra perk for universal life insurance. Indexed universal life insurance takes a
similar approach by letting the policyholder earn a fixed or equity-indexed rate of
return based on the cash value component. Finally, the variable universal life insurance
allows the policyholder to invest the policy’s cash value in an available separate account.
variable universal life insurance also has flexible premiums like universal life insurance.
So, it's clear that you have a lot of homework to do before making up your mind!
Make sure to tune in to our channel to learn more about life insurance as we
will continuously upload videos that will help you in this life-altering decision.
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