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Congratulate Your Graduate With Life Insurance?

By Maryalene LaPonsie on June 3rd, 2010

We imagine that if Frank Darras has children, they were sorely disappointed when their graduation rolled around. Instead of an iPhone or a laptop or a large wad of cash, they probably ended up with…wait for it…a life insurance policy. Yes, what better way to send your loved one out into the world.

Cheap life insurance--a benefit of youth

Darras, a leading insurance lawyer, isn't joking when he says life insurance is the best gift for a graduate. Not only do whole life insurance policies earn cash value over time, life insurance premiums are generally cheaper for young adults.

Another reason Darras offers for life insurance as a gift is future insurability. While a high school or college grad may have few health concerns, a future illness may make them uninsurable. Darras says: insure them now before it is too late.

Finding the right life insurance policy

Before purchasing a life insurance policy for your graduate, take the time to research the difference between available plans. Permanent life insurance policies, such as whole life insurance and universal life insurance, have higher monthly premiums. These policies include a savings component, so the policies earn cash value over time.

On the other hand, term life insurance offers bargain basement pricing, especially when compared with permanent life insurance policies. There is no cash value or savings component, just life insurance coverage, so you get affordable life insurance premiums. You purchase the insurance for a term, such as 10 or 20 years, and the payout is a fixed amount regardless of how long you've been paying your premiums.

If you follow Darras's route and purchase a life insurance plan as a graduation gift, do your homework. Compare insurance plans, look for hidden fees and renewal periods, and check to see if the premium amount may adjust sometime down the line.

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