The need for life insurance is now more acute than ever before. With the average lifespan now approaching sixty, it is vital to ensure one has some protection in place should things go awry. Many people will invest their money into mutual funds but in the long run this is not guaranteed. Some of the big businesses of the world have insurance departments which handle claims from time to time. It is not just individuals who require life insurance however; many companies also offer this as a key feature.
Annuities and life insurance both enable people to invest in a tax deferral basis. Annuities pay a principal amount to the policyholder’s family upon his or her death. On the other hand, cash value policies may pay a lump sum amount to the beneficiary in case of death.
Both annuities and life insurance are generally of two types; the term and permanent life insurance policies. Term life insurance contracts have a maximum amount that can be paid out for a particular period of time. In exchange for the premium paid, the insured gives a certain amount of equity to the company. At the end of the contract, if the insured dies during the period the contract has been in force, his estate gets paid the remaining balance due under the terms agreed upon by the insurer and the insured.
Permanent life insurance policies are different in their nature. The term policy allows the premium to be paid only up to a specified amount and at the end of the contract; the whole life insurance policy is then invested in an interest bearing account. This is done in order to ensure that the insured does not get trapped in a situation where he invests all his savings into something that might not yield a profit in the long run. The premium paid every month is then tax deductible.
The tax deductible part of the policy is the premiums paid and the excess funds are then invested. There is also an option for the policyholder to give away his premiums in order to purchase a certain interest bearing investment product. When this is done, the cash accumulated is used to make regular payments to the company. As the insured party receives regular payments from the company, it becomes easier for him to manage his savings in a better manner.
For life insurance policies, those on fixed incomes receive special benefits. Disability insurance for seniors provides special income support to people who become invalid suddenly. This is to ensure that they do not become burdens upon their kinfolk when they become unable to work. For instance, in case of the elderly who remain dependent on their children, the disability insurance ensures that both parties do not starve.
In case of variable life insurance policyholders pay the premium on a monthly basis and the policyholder makes constant premium payments until such time as he attains his death-time or the maturity of his policy. The death-time here refers to the time period after which the policy-holder would cease to receive payments if he dies. For this reason, a constant cash accumulation is necessary for these policyholders. Therefore, they benefit from a good and effective life insurance policy that has a permanent life insurance feature.
Variable life insurance may be used for retirement income. The policyholder can use the lump sum obtained from it to purchase real estate. In this way, he gets to secure a steady source of income even while he sways towards old age. Also, he gets more options to choose from as compared to the fixed-income policy.