LIFE INSURANCE AND YOU

I found this fascinating quote today:

PICKING A LIFE INSURANCE:1. TERM INSURANCE:A term insurance provides protection for a specific period of time. It pays a benefit only if anything happens to you during the term. Some term insurance policies can be renewed when you reach the end of a specific period which can be from one to twenty years (1-20). The premium rate increase at each renewal date. Many policies require that evidence of insurability be furnished at renewal for you to qualify for lowest available rates.2. PERMANENT INSURANCE:Permanent insurance provides life long protection and is known by a variety of names, described latter in this article. As long as you pay the necessary premiums, the death benefits will always be there. These policies are designed and priced for you to keep over a long period of time. If you do not intend to keep the policy for the long term, it could be the wrong type of insurance for you. Most permanent insurance policies including whole, ordinary, universal adjustable and variable life insurance have a feature known as “cash value” or “cash surrender value”. this feature which is not found in most term insurance policies, provides you with some options. You then can cancel or “surrender” the policy “in total or in part” and receive the cash value and a lump some of money, if you surrender your policy in the early years there may be little or no cash value. And if you need to stop paying premiums you can use the cash value to continue your current insurance protection for a specific period of time or provide a lesser amount or protection to cover you for as long as you are alive. Usually you may even borrow from the insurance company using the cash value in your life insurance as a collateral. Unlike loans from most financial institutions, and you ultimately must repay any loan with interest or your beneficiaries would receive a reduced death benefit.The cash value of many life insurance policies may be affected by your company’s future experience, including mortality rates, expenses and investment earnings. Keep in mind that with all type of permanent policies, the cash value of a policy is different from the policy face amount . Cash value is the amount available when you surrender a policy before its maturity or your death. The face amount is the money that will be paid at death or at policy maturity.Clemson, LIFE INSURANCE AND YOU, Nov 2008

You should read the whole article.