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Common Types of Life Insurance Policies

By Compuquotes Team on March 26th, 2008

It is easy to understand that most people would rather not think about life insurance but we must realize that it is a natural part of life. There are so many different companies offering several different types of policies but there are three main types including term, endowment, and whole life.

Whole life insurance does exactly what it says, protects you for your entire life. With a whole life insurance policy you are required to pay monthly premium. A portion of this premium goes towards your life insurance while the rest goes into a savings account. The savings you accumulate is known as cash value and you can use it as collateral to borrow money.

A whole life insurance policy will mature when the policy holder turns 100 years old. When this happens the insurance company will then cash out the policy for face value and cancel the policy. The face value is the amount that the policy would have paid in the event that the policy holder died.

The second most common type of life insurance is endowment insurance policies which are designed to be paid for a specific amount of time until the policy matures. Likely reasons for choosing endowment insurance could be for college tuition, retirement, or other high cost expense. You will notice that endowment policies are usually priced higher because they are designed to be paid in full after a specified amount of time rather than over a period of the policy holder's life.

The most common and least expensive type of life insurance policy is term life insurance. These types of policies can be bought for a specified amount of time similar to the way endowment policies work, except that there is no cash value accumulating with term insurance.

Term life insurance policies are great for people who would like additional security over a specified amount of time. This would work for the main financial provider of the house who would need additional insurance to cover themselves during their working years when they still have financial obligations such as mortgages and children.

Prior to getting quotes from different companies you should sit down with your spouse and calculate every single bill you have, then separate these bills and figure out your regular monthly expenses for your entire household. Determine how much you are going to pay each month to satisfy each bill.

The types of payments that will eventually be satisfied include your car, boat, RV, home, and furniture. All of these costs should be figured into the amount of coverage you will need in order to pay them off in the event of your death.

The second pile of bills should include your living expenses such as your homeowners insurance, life insurance for the entire family, food, utilities, and clothes. You also need to think about the loss of income that was provided by the main financial provider. If you have children you want to take their ages into account, as well as their medical and dental insurance and school expenses.

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