subject: Choosing the Right Life Insurance - Making the Best Decision [print this page] Choosing the Right Life Insurance - Making the Best Decision
Choosing the right type of insurance policy to meet your needs requires you to have a clear purpose in mind for the policy. If you are interested in simply covering whatever costs are associated with your funeral and burial, a simple, low-cost term life policy may be best. Term life policies are probably the most common type of life insurance policy purchased by consumers because the monthly premiums are often exceedingly low.
These policies are designed to expire after a set amount of time and do not provide the policyholder with any cash value or return on their investment if they happened outlive the term.
Term life insurance policies generally last anywhere from 5 to 30 years although it is possible to purchase a policy that expires in as little as one year. Annual term life insurance policies are generally the cheapest of all life insurance plans but they must be renewed each year and each year the premium is likely to go up. Over time, an annual policy can end up being quite expensive on a monthly basis. Typical term life insurance policies have no cash value associated with them which means that if a policy holder outlives the term they will not receive anything from the policy.
There are certain term life coverage that do provide something beyond simple peace of mind. Return of investment term life policies return some, if not all, of the premiums that have been paid back to the policyholder once the term has expired. These types of policies are more expensive than traditional term life policies. Investment policies are an excellent way for an individual to plan for their retirement or to set aside extra cash for the future. Most financial planners would not recommend a whole life or permanent life policy to an older individual since it often takes a minimum of 10 years for the policy to accrue any additional cash value.
When it comes to investment policies, there are several options available. A variable life policy provides an individual with the opportunity to choose how the money they are spending is invested. These policies will allow you to invest some or all of the premiums into stocks, bonds, or mutual funds. If you are uncomfortable with the risks associated with investing in the market, a universal policy which accrues additional income from interest may be a better match. There are also variable/universal policies which provide some investment opportunities in addition to interest income.
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