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Wednesday, February 27 2013

The general rule of thumb is that anyone with children should buy life insurance immediately. Those who live with dependents or are breadwinners should make financial safeguards for the people they’ll be leaving behind, if ever. To get started, here are the two main types of insurance that every parent should be familiar with.

What is term insurance?

Term insurance provides coverage for a certain amount of time or a term. If the holder outlives the term, he gets nothing. This is an inexpensive option for parents who want substantial insurance coverage at a lower cost. Those who are in their 20s to 40s typically are generally in good health, so their risk of dying is quite low.

Some policies are renewable at the end of the term without a medical examination for a higher premium, while some are not. This is understandable because the older a person gets, the greater the chance of death within the policy term. Others may also be converted from term to whole life policies at the end of the term without the need for a requalification process.

What is permanent insurance?

Unlike term insurance, permanent insurance can never be canceled as long as premiums are paid. This type of insurance is also considered an investment. A permanent policy uses the premiums paid for the first few years to cover the cost of the plan holder’s risk of death. Aside from this, the excess amount goes to a reserve account which is used by insurance companies like Insurance At Your Fingertips for investments.

A portion of the interest or dividends from the returns are passed along to the policy holder. These may be added to the policy reserves or cashed in if the holder decides to end the policy. The amount that accumulates is not taxable, and partial withdrawals can be made without paying tax.

Death is inevitable. However, life must go on for the living who will be left behind. With all the policies available today, it is easy to get overwhelmed by insurance jargon and end up paying for a policy that does not meet a family’s needs. Therefore, parents must adequately educate themselves before choosing from among many cheap term life insurance quotes from insurance providers today.


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