Life Insurance

 

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Buying Life Insurance.

     The main purpose of life insurance is to provide cash to your family after you die. The money your dependents will receive (the "death benefit") is an important financial resource: It can help pay the mortgage, run the household, ensure that your dependents aren't burdened with debt. The proceeds from a life insurance policy could mean that they won't have to sell assets to pay outstanding bills or taxes, that there will be money to pay ongoing expenses. What's more, there is no federal income tax on life insurance benefits.

Types of Life Insurance.

    Life insurance generally falls into two categories, Term Insurance and Permanent Insurance.

Term Insurance.

     Provides protection for a specific period of time. It pays a benefit only if you die during the term of the policy. With a guaranteed term policy, the premium rates remain level for the number of years guaranteed. On other term policies, the premium increases at each renewal date. Some term insurance policies can be renewed when you reach the end of the term - which can be from one to 30 years. The policy may require that you present evidence of insurability at renewal to qualify for continued lower rates.

 Permanent insurance.

     Provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time. If you don't intend to keep the policy for the long term, this may be the wrong type of insurance for you.

Permanent policies are known by a variety of names: whole, ordinary, universal, adjustable and variable life. Most have a feature known as "cash value" or "cash surrender value."

 

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