Life Insurance policy with Cash Value
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Term vs. whole life insurance policy:
There are two major types of life insurance: the term insurance and the permanent insurance Policy. Each of them can be divided into subtypes, depending on contract claims and clauses. The term insurance can be taken for periods of time ranging from 5, 10, and 15 to 20 years. In its initial stage, the term insurance has no cash value, especially if it is a low cost insurance cover. But if one chooses to purchase a convertible or renewable term insurance, there is a chance of benefit as this clause changes the term insurance (with no cash benefit) to a Whole insurance Policy (with cash benefit). This also explains why the permanent insurance Cover is also called a life insurance with cash back. The main difference between the two is the cash value component, determined by the price of the premiums. Logically, the premiums paid for a cash benefit life insurance are much higher than those paid for a term insurance.!
While the term insurance offers coverage for a limited period of time, the other type of insurance offers coverage for the remainder of one"s life. However, it means paying premiums 10 times the price of term insurance premiums, but it is the only way one can earn a profit out of a life insurance. How does that work, you might want to know? The answer is in tight connection with the high expenses required by the permanent life insurance. A small portion of each month?s premium is separated from it and delivered to a cash value portion. Initially, the amount that goes to the cash value portion is very large, but it keeps decreasing slowly with the passing of time. The reason for this is that the permanent life insurance premium is made out of two parts: the cash value portion (considered the overpayment portion) and the portion that pays for the insurance. The latter grows over time and in order not to raise the price of the premium as a whole; the company slowly decreases the overpayment portion, according to the raise of the other, thus ensuring a counterbalance between the two components.
whole life insurance and the universal life insurances
Depending upon the permanent life insurance one chooses, the cash value premium woks differently. There are four types of permanent life assurance: whole life insurance policy, universal life Cover, variable life policy, and variable universal life Plan . The variable life insurance allows one to invest one?s premiums, but there might be a drawback if the investments do not come out as expected. The safest options for a cash value life insurance remain the whole life insurance and the universal life insurances. If one is uncertain whether to purchase a term life insurance or a permanent life insurance, there is always the possibility of switching from the former to the latter.
The best options for a cash value life insurance are the whole life insurance and the universal life insurances.
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