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If you have been looking for life insurance, you have arrived at the right site. 1stinsurancequotes.com is a definitive resource guide that will help you understand life insurance and will direct you to the type of life insurance that will provide the most dependable coverage for you and your family.

Life insurance is confusing for most people. Consequently, agents are often tempted to do a quick analysis of the type of insurance they think you will be most likely to purchase and just leave it at that. This user friendly resource guide will help you understand different types of policies so you have a better idea about what to ask the agent.

Even the best Insurance companies in the business offer variations on  life products and may jazz up the least desirable products with colorful brochures that make the policy look inexpensive, but that actually have “fine print” if only you know where to look. You want the best coverage at the lowest available rate, and sometimes you may indeed only qualify for some sort of modified policy, but you need to fully understand what you are getting and you need to know if there are any other options for which you might qualify.

You can use our site to find the best prices AND to educate yourself about the way different types of life coverage work.

Major types of Life Insurance

The type of life insurance purchased most often by working age people is Term insurance. That’s because you can purchase  a lot of coverage for very low cost. However the insurance is temporaryoften for 20 years, although if you are over 65 you may only be able to get 10 years of coverage. The company does not actually intend for you to renew the insurance at the end of the period, but you will have the option to do so if you are willing to pay a sharply increasing premium every year. You may be able to convert a term life to a permanent policy, but the older you wait to do this, the more expensive it will be.

Whole Life is the easiest type of policy to understand. You pay a certain premium for your whole life although some companies offer “paid up” policies which are paid off in 15 or 20 years. Of course, the premium for a “paid up” will be higher. During your life time, the policy builds cash value which you would get if you ever decided you didn't need the policy and wanted to "cash surrender" it. If you die while the policy is in force, your beneficiary will collect the face value, regardless of how much you have paid into the policy. If you live to age 100, your premium will stop and you will have the option of cashing it in. However, most policies will allow you to simply let the policy keep growing to age 120.

Burial Life insurance or just enough money to pay for a funeral is what people often end up with if they put off purchasing insurance until their senior years. This can be purchased in two ways. Many companies have “easy issue” policies which are priced higher than a standard whole life, but do not have waiting periods. Some health problems may be accepted with these, and the policies are usually for $25,000 or less. These are purchased through a regular insurance company.

If, however,  you have severe health problems, you may still be able to purchase life insurance directly from a funeral home. This is called "pre needs" insurance and locks in the price of your funeral. You pay the premium, but the beneficiary is the funeral director.

A third choice which has become available in recent years is a "Graded Benefit Life" insurance. These policies have small face values—ranging from $1500 to $25,000 max, and must be in force for two to three years before paying the entire face value. If you die in the early years, your beneficiary receives the premium plus interest. Graded benefit policies are more expensive than standard policies for the same amount of coverage, but coverage is usually guaranteed.

Universal Life is a flexible policy with features of both Term and Whole life. The premium is usually inexpensive compared to whole life, but higher than Term. The policy has a life insurance portion, and an accumulation portion. Your premium goes into a "pot of money" on which the company pays interest. Fees and the cost of insurance (COI) are then paid out of the pot. If you pay more than what is actually needed to pay the COI, you will build your pot of money and stay ahead of the COI. If you pay only the minimum required, the savings will build for a few years, but then it will fall behind the COI and the policy will terminate—just like term coverage. It sounds confusing but really isn't since the company is required to send you an annual statement which will show you exactly how your cash is growing and allow you to make adjustments as needed. It is generally better to pay more in the early years as the extra will all go toward accumulation and build interest. Then, after retirement, you will be able to cut back on premium but still have the life insurance you want. Ask your agent for a thorough explanation of the company’s interest rates and likelihood of the premium needing to be changed over time.

Variable Life is  the most expensive type of permanent, cash value life insurance you can buy because it allows you to direct a portion of your premium into stocks, bonds or other “variables” in the company’s portfolio. In a period of economic growth, your investment can grow quickly, and you can use some of it to pay the COI, thereby temporarily eliminating or lowering your premium. These policies are hard to find because they can only be sold by agents who have a General Securities licensethat is, a license to sell variable products such as stocks. Since these policies are dependent on the stock market, you can lose value as quickly as you can gain, so it is important to have a broker who will monitor your policy and move money quickly if the economy turns sour. However, even if the account value goes down, modern Variable policies will have a contract level death benefit which will be guaranteed. Additionally, even if your account balance becomes attractively high, you cannot take money out of a Variable policy prior to your death.

Variable Universal combines the best features of a universal and a variable policy. You still invest in the company’s portfolio, but like a universal, you can add extra cash and also make withdrawals if you need to. Rather than a set interest rate which varies only slightly over time, a variable universal is indexed to the S & P 500. In other words, if the market is performing well, the company will pay a higher percentage into your account. If the market drops, your rate will also drop, but will not drop below a guaranteed contract rate. (see also equity indexed universal)

Survivorship insurance is another relatively rare type of policy. Most companies don’t offer it because it means they will only be collecting one premium for two or more people. The benefit is paid out when the second or last insured person dies.  It is a good type of insurance for a couple whose goal is to protect a large estate against estate taxes. Life insurance is a tax free benefit, and a large payout can enable a person to pay taxes on an estate and on an inherited IRA, potentially saving them thousands of dollars. The inverse of this policy is Joint or First to die which also covers two or more people, but pays the beneficiary whenever the first insured dies. In this case, the first person to die would need the money to pay final expenses and to have something to live on. This is a particularly effective approach if the beneficiary inherits a business dept or if there are no additional beneficiaries who would need the money after the last insured dies.

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