Archives for July 2010

Cash value life insurance policies differ from term policies in many ways. The major differences are that cash value policies offer permanence and cash value accumulation in addition to death protection. It is very important to understand how this cash value aspect works so as not to be misled.  We will use whole life insurance in the below explanation because it is the standard form of cash value insurance. [Read more…] about Introduction to Cash Value Life Insurance

Cash value life insurance policies differ from term policies in many ways. There are also several different types of cash value policies, resulting in much more variety. Below are descriptions of some of the features of cash value policies. Though not all are unique to cash value policies, it is important to recognize their significance and identify which features are attractive to you.

Permanent Protection

Cash value policies can offer permanent protection that doesn’t need be renewed (or lapse) at the end of each period like term insurance. Cash value policies stay in force until the policyholder dies or until the policy lapses due to missed payments, cancellation, etc. [Read more…] about Explore Options and Features of Cash Value Policies

Term insurance is the most basic type of life insurance.  It is a ‘pure protection’ policy because it only provides a death benefit and accumulates no cash value. Term insurance is similar to property insurance (i.e. home, auto) because coverage is rented and when the insured dies, the insurance company will pay the death benefit.  If death does not occur before the term expires, no death benefit is paid and the policy must be renewed to maintain coverage.   Most term policies are “guaranteed renewable” which means that they can be renewed without having to prove insurability. [Read more…] about Introduction to Term Life Insurance

Some insurance companies offer life insurance policies for children. Though a small percentage of families are in the position to consider buying life insurance for their children, let’s take a look at the advantages and disadvantages.

The advantages: Allows the child to have some sort of coverage as they age, they can borrow against the policy later and the policy seems  inexpensive compared to the cost of insurance for adults.

The reality: These policies seem inexpensive compared to a life insurance policy for an adult, but when the expected cost is taken into consideration, they are relatively expensive (even after figuring burial costs). This money that is spent to insure the life of a child could be invested in an education fund, emergency fund or some other type of fund for the child at a significantly higher interest rate.  What is the purpose of insuring the life of a child?

The important individuals to insure are the breadwinners, the individuals the family relies on for income or other essential support that would otherwise cost money to replace (i.e. stay at home mom taking care of children) and most children do not bring in substantial, if any income.  If there are extra funds, consider it.  But a family that can afford an insurance policy for a child is typically sufficiently well off that they don’t really need the coverage.  I consider these policies controversial at best.