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Whole or ordinary life |
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This is
the most common type of permanent insurance policy. It offers a death
benefit along with a savings account. If you pick this type of life
insurance policy, you are agreeing to pay a certain amount in premiums
on a regular basis for a specific death benefit. The savings element
would grow based on dividends the company pays to you. |
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Universal or adjustable life |
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This type
of policy offers you more flexibility than whole life
insurance. You may be able to increase the death
benefit, if you pass a medical examination. The savings
vehicle (called a cash value account) generally earns a
money market rate of interest. After money has
accumulated in your account, you will also have the
option of altering your premium payments – providing
there is enough money in your account to cover the
costs. This can be a useful feature if your economic
situation has suddenly changed. However, you would need
to keep in mind that if you stop or reduce your premiums
and the saving accumulation gets used up, the policy
might lapse and your life insurance coverage will end.
You should check with your agent before deciding not to
make premium payments for extended periods because you
might not have enough cash value to pay the monthly
charges to prevent a policy lapse. |
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Variable life |
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This
policy combines death protection with a savings account that you can
invest in stocks, bonds and money market mutual funds. The value of your
policy may grow more quickly, but you also have more risk. If your
investments do not perform well, your cash value and death benefit may
decrease. Some policies, however, guarantee that your death benefit will
not fall below a minimum level. |
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Variable-universal life |
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If you
purchase this type of policy, you get the features of variable and
universal life policies. You have the investment risks and rewards
characteristic of variable life insurance, coupled with the ability to
adjust your premiums and death benefit that is characteristic of
universal life insurance.
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