Life Insurance Options

There are basically two kinds of life insurance. There is "term life," which is an insurance policy for which monthly payments are made. Term life insurance policies do not ever accrue a cash value. The only value that a term life policy has is that in the event of the policyholder's death, the face value of the policy will be paid to his beneficiaries.

The other kind of life insurance is called "whole life." A whole life insurance policy gains value as time goes by. A whole life insurance policy becomes an asset in that it has cash value. Any possession that has a cash value is an asset. Your car is an asset ? so is your house and your lawn mower.

A term life insurance policy costs less than a whole life insurance policy for the same face value.

The reason why people buy life insurance is usually so that their loved ones will be financially taken care of in the event of the policyholder's death. Husbands want to provide for their wives and children. Wives want to lighten the burden of their husband and children. Sometimes, business partners want to provide a financial cushion for one another.

Because the monthly premiums are far less for term life insurance policies, many young families opt for them in their early years. These policies provide a level of protection at a price that can be afforded. But as the years go by and financial situations improve, most families move up to whole life insurance policies in order to have the same level of protection while adding to their accumulated assets.

The bottom line is simply to shop around. All life insurance is not created equally. Premiums are based upon the age of the insured at the time the policy is issued, and the younger a policyholder is, the lower the premiums will be.

Tags: no credit crunch, personal financial problems, managing personal finance, credit score, credit card debt, debt consolidation, mortgage