for loans or mortgages, again ensuring that the beneficiary will not be burdened by the responsibility of repaying them when the insured passes away.

This is how it works. You purchase the insurance plan. This insurance will cover you effectively for the term or the number of years specified in your insurance contract. Within that term, too, you will have to pay insurance premiums regularly. If you die within that specific time period, your family or whoever your beneficiary is will receive the amount of money specified in the plan. If you don’t die within the term, you lose your premiums, unless your policy states that you get them back.

Decreasing Term Life Insurance

This is taken out specifically to provide a contingency for repaying the policyholder’s loans and mortgages just in case he passes away before he’s able to repay them. The insurance coverage is for a specific period (usually equivalent to the life of the mortgage or loan), and the level of coverage decreases during the policy’s term – usually in conjunction with the amount of the loan or the mortgage (e.g., as the loan is repaid, the amount of cover is reduced to cover the balance remaining). The premium remains constant during the term of the policy.

Decreasing term insurance works pretty much the same way as level term insurance in term length and what triggers the payout. The only difference is the decreasing value of the coverage.

Whole Life Insurance

If you take out this type of insurance, your family or beneficiary will get a lump sum of money. This money can then be used to pay for your children’s educations or mere day to day expenses.

Of all three types, this is the most expensive in terms of premiums. However, this type of insurance lets you build cash value which you can loan out. You can also surrender the insurance in exchange for the total cash value of the policy. This type of insurance is therefore more flexible since it offers you more options. Moreover, you have coverage as long as you live, provided of course that you keep up your premium payments.

The above are only three of the available life insurance options available. It would be best to sit down with an authorized insurance person for advice on the best type of insurance for your particular needs.

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Allen Bohart is a life-long reader and writer with an interest in many subjects and a strong background in business. Personal finances and life insurance are interesting to him.

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