Information from the Readership: Life Insurance
I just got an excellent comment from a reader, so I figure that I should bring it to the forefront of this blog. The reader described life insurance in depth. I have pasted the comment below.
November 8th, 2006 at 6:15 pm e
Insurance lingo is also a bit difficult to understand. For your readers, here are a few examples:
Term insurance: This is the cheapest, simplest kind of life insurance. Buy a policy for a set term (typically 10 or 20 years) and if you die during that time, your beneficiary will receive the benefit.
Whole life: This is the simplest type of permanent life insurance. Your premiums remain the same throughout the life of the policy, and a portion of each premium is invested by the company, allowing you to accumulate this money (the cash value) on a tax-deferred basis.
Universal life: This has the same basic features as whole life, but is a bit more flexible. If you choose, you can pay in amounts above your regular premium, and adjust the death benefit relative to the cash value amount.
Variable life: With a variable policy, you get a choice of different funds where the company will invest your money for you. Generally, if the investments do well youíll have a higher death benefit and greater cash value. It they donít do well, youíll have a lower death benefit and cash value, though some policies guarantee a minimum death benefit.
Variable universal life: This combines the flexibility of adjusting the amount of the death benefit and premium (as in universal life) with the ability to take a little more risk in investment choices in the hope of getting a bigger return (as in variable life).
Bottom Line: While complex at first glance, life insurance need not be overly confounding. If you understand your choices and are clear about why youíre buying life insurance in the first place, the right option for you will be obvious.
I found that comment to be rather edifying, and encourage readers to provide similar, high-quality comments. So, who needs life insurance in the first place? People that have dependents who depend upon their income need life insurance. For single people not supporting their parents or children, life insurance is unnecessary.