Best Life Insurance Policies

The best life insurance policy for any individual is one that balances the amount of the premium and the amount of money that is paid to the beneficiary upon the death of the policyholder. The best policy for one individual may not be the best policy for another, even if they have similar needs. The first step in choosing the best life insurance policy is to understand the differences between the types of policies available. The second is to understand how an individual’s specific needs will determine which life insurance is the best for him or her.

There are two types of life insurance: Term life and permanent life.

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Term Life Insurance

Term life insurance is in force for a specific number of years. The number of years is known as the term. So, term life insurance protects the beneficiaries of the policyholder for the duration of the term. If the policyholder dies within the term, his or her beneficiaries are paid the amount of the policy. This payment is known as the death benefit. If the policyholder does not die during the term, the coverage ends.

One kind of term life insurance is called “term insurance with a Renewable Term”. This type of policy remains in force for one year only and is renewable at the end of the one-year term. Because the policyholder gets older with each year, the premium increases with each renewal. The other kind of term life insurance is called “term insurance with a level term”. This type of policy can be purchased for as few as five or as many as 30 years, depending on the age of the policyholder at the time of application. Because the term is locked in for a defined period of time, the premium remains the same for the duration of the term.

Permanent Life Insurance

A permanent life insurance policy remains in force permanently. Permanent insurance has two parts, an insurance part and an investment part. The premium that is paid by the policyholder to the insurance company is divided between the cost of providing the insurance and a separate account that builds cash value.

The two kinds of permanent life insurance are whole life and universal life. While they differ slightly, the death benefit that is paid on the life insurance portion of each is roughly the same. However, the investment part for each is different.

The premium for a whole life policy can be paid over time or as one lump-sum payment. The amount of money earned on the cash account depends on the type of policy selected. Options range from a participating account, which participates in the earnings of the insurance company to a non-participating account, which does not.

The premium for a universal life policy is invested for policyholder. He or she can choose from a number of investments, from conservative to aggressive. While the account can gain value, it can also lose value if the investments do not do well.

Young Single Person

Depending on his or her financial situation and the amount of accumulated assets, the best life insurance for a young single person may be an inexpensive term life policy. Life insurance is much less expensive for younger, healthier applicants. If he or she has no dependents, and is looking primarily to leave enough money for the estate to pay funeral and burial expenses or to pay off a mortgage, student loans, a car or credit card debt, a term policy will fill those needs.

If he or she marries or has a child after the term life policy is in force, he or she can almost always convert it to a permanent life policy. This would provide additional benefits such as the ability to borrow against the cash value for emergencies or for a college education.

Middle-Aged Father of Three

The best life insurance policy for an older, married father of three may also be a term policy if cash is a concern from month to month. However, for families with significant assets and the financial discipline to make the regularly scheduled premium payments, a permanent policy may be the best choice.

Because of the investment options that come as part of a permanent life policy, the money that is part of the cash account has the opportunity to accumulate over time. All earnings grow tax-deferred until the policy matures. A whole life insurance policy is often considered when additional money is available for retirement savings. The protection of the death benefit combined with the potential for growth provides many families with well-rounded financial stability.

The best life insurance policies for estate planning and small business succession planning are permanent policies. Due to the significant tax bills that could accompany an inheritance of stocks, bonds, property or a business, a permanent life policy is usually a good way to cover taxes. Those purchasing a policy for one of these reasons need to make sure they name a specific person, such as a child, spouse or business partner as the beneficiary and not the estate. The proceeds of an insurance policy do not go through probate unless the estate is named as the beneficiary.

Which Companies Sells the Best Life Insurance Policies?

A number of life insurance companies sell the best life insurance policies to meet an individual’s unique needs. New York Life, John Hancock and TIAA-CREF are just three highly respected life insurance companies in the United States. Each receives consistently high ratings from the four primary credit ratings agencies: A.M. Best, Fitch, Moody’s Investors Services and Standard & Poor’s.

Along with term and permanent life insurance policies, New York Life, John Hancock and TIAA-CREF also offer comprehensive financial services such as retirement planning, annuities and mutual funds. TIAA-CREF specialized in financial products for teachers and those in the medical profession. Each has products that suit the needs of a young single person with no dependents and a married father of three.

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