Decades ago, the majority of life insurance policies were guaranteed and provided by mutual fund firms. People had limited choices and the way insurance worked was pretty simple. Policyholders just needed to pay a high, set premium and they are guaranteed a death benefit. However, things have changed today. Insurance rates now are higher and policyholders can now choose a policy that can be structured to accumulate cash value. To stay competitive, insurance companies are offering non-guaranteed policies.
How Guaranteed and Non-Guaranteed Policies Work
These days, insurers provide a wide range of guaranteed and non-guaranteed life insurance policies. With the former, insurance companies assume the risks and guarantee death benefits to beneficiaries. They will absorb the loss if expenses increase and investments underperform. But, with a non-guaranteed policy, policyholders take the risk and allow insurance companies to increase policy fees in exchange for lower premiums. How do I guarantee my universal life insurance policy? Visit Guaranteed Universal Life Insurance/ GUL Buyers Guide to know the right answer.
Term Life Insurance
This kind of life insurance is guaranteed. Policyholders pay a certain amount of premium as stated in the policy. A term policy that is renewable every year can go up each time. But, a level term policy doesn’t change for a set period but comes with a higher initial premium. After the set period expires, usually 10, 20, or 30 years, it becomes a term that must be renewed every year with a premium based on the attained age.
Permanent Life Insurance
Permanent life insurance includes universal, whole, and variable life insurance. They can be both guaranteed and non-guaranteed. A number of permanent policies provide a rider for an extra cost which is a part of the contract and ensures the policy won’t lapse. Even if the cash value reduces to zero, the policy remains guaranteed as long the policyholders pay their premiums on time.
Why Buy Life Insurance
Life insurance guarantees that you don’t leave your family behind with debts and other financial troubles should you die prematurely. The death benefits your beneficiary can get can be used by your family for paying debts, paying your children’s college education, and for other things necessary for the survival of your family despite losing their breadwinner.
But to make sure you get the right policy for you and your family, ensure you keep yourself informed. Choose the company that has a solid reputation in the industry to make sure they pay your beneficiary when the right time comes.