Life Insurance:Understanding The Value of Life Insurance-II
Nov 14th, 2007 by Kaushik Adhikary
Image via WikipediaLife insurance is an important financial asset. In fact, it should be the primary asset for families that might experience severe lifestyle disruptions in the event of someone’s death.Thats why you need to understand the value of life insurance first.
Unfortunately, life insurance is frequently misunderstood by people. One reason is because life insurance doesn’t benefit the insured party, who is typically the person paying for the life insurance. After all, the insured party will be unable to witness the undeniable family value of the death proceeds.
Logically, the second reason for this misunderstanding is because some life insurance has a cash surrender value. This means if the owner of the policy decides to stop paying the premium, an amount of cash is returned provided the death benefit is surrendered.
It’s important to recognize there are only two types of life insurance: term and cash value. Term is always cheapest in the early years, but becomes expensive when one reaches the age of 70, or then after.
Of course, this is before the normal or expected time of death. So it is highly unlikely that a term policy will actually pay the death benefit unless one dies prematurely.
There are many types of cash value policies such as the classic whole life, universal life, variable life and universal variable life. The competitive marketplace has produced an overwhelming number of hybrids each one created for a specific reason because of government intervention.
This article obviously is not attempting to describe the type of policy under life insurance segment. The message here relates to the enormous value of life insurance itself… not any particular type of policy.
Indeed, if any recipient of a life insurance death claim have asked an insurance agent what “type” of policy had been issued. The fact of the matter is the tax-free death proceeds provided a welcomed amount of cash at exactly the time when money was needed the most.
This is when the income of one of the breadwinners was unexpectedly and abruptly cut off from the family forever. The type of policy is not important to the survivors. The only thing of importance to the survivors is that the policy was actually in force at the time of death.
