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Life Insurance Policies - Choosing the Right One

By Compuquotes Team on March 26th, 2008

A life insurance policy offers your family the financial protection they will need in the time following your death. Those with families should definitely consider a life insurance policy as a necessary backup for things that we cannot control and are inevitable for everyone.

The life insurance market is extremely competitive which make it possible for you to find a policy that is perfect for your specific needs and financial situation. There are endless amounts of policies and terms but there are five main types of life insurance that are offered.

The first and most common is term life insurance. This life insurance protects a certain individual's life for a specified amount of time and pays a certain amount of money in the event of their death. This is likely the most common choice because it is the most inexpensive type of life insurance because it only pays out when the policy holder dies.

Another type is whole life insurance. This type of insurance offers protection for your family while building up cash value. Whole life insurance policies take a portion of your premium and offer a life insurance benefit then takes the other portion of your premium to invest in other accounts in hopes of getting a high return.

Whole life insurance is a great way to go if you have the money because at the same time it provides protection to your family if you should die but it also offer financial growth through company managed investments that are tax deferred. However with this option your insurance company will decide where your money is being invested.

A whole life insurance policy comes with a fixed premium for the entire length of the policy. The only way it can be canceled is for non-payment. You are able to receive dividends from your policy or to use them to pay the premiums referred to as disappearing premiums. You are also able to withdraw money from the insurance policy during your life.

Universal life is another life insurance option that offers you the same benefits as whole life insurance does but it also allows the money to be invested into different money market accounts. This is wise because money market accounts give the policy holders a higher return on their investment then a whole life policy's investments.

You may also opt for a variable life insurance policy which offers you permanent protections as well as account flexibility. With a variable life insurance policy you are able to invest your money into stocks, bonds, and money market accounts.

Variable life insurance doesn't offer a guaranteed death benefit to your family but rather based upon the performance of the fund. These policies do allow you to borrow from the account.

Another option for life insurance is universal variable life which provides you with more control over the cash value and investment portion of the policy. This type of insurance option allows you to divide the money to invest in a wise combination of stocks, bonds, and money market. Universal variable life also provides flexible premiums and tax deferred accumulation.

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