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When shopping for life insurance coverage, it is
important to know the differences between the
available options.
Term life insurance is the most basic type of
life insurance. Term life refers to coverage
that you purchase at a specified price for a set
period of years. There is no investment
component with term life insurance. In the event
of your death during the term of your coverage,
your identified beneficiary will receive the
pre-determined value of the term policy. Term
life insurance only pays a claim upon death of
the policyholder.
Whole life insurance, though similar to term
life, is purchase for your entire life span-your
"whole life." The premiums often remain the same
each year. The company who owns the policy will
invest a portion of your premiums in order to
build cash value for the policy holder.
Variable life insurance coverage also allows for
the building of cash value through the
investment in separate accounts, such as stocks
and bonds. The death benefit from a variable
life insurance policy includes both the
predetermined face value of the policy, as well
as the cash value that has been built through
investments. In other words, the payout os
usually higher than that of a whole life policy.
Universal life insurance policies provide both a
death benefit and a tool for savings, through
tax deferred accumulation. Universal life
policies combine the protection similar to that
of low-cost term policies with the savings
benefit similar to whole life insurance
policies.
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