Money Matters: Skyloff Financial Group's question of the month
31.12.69
By Aaron Skloff, AIF, CFA, MBA
Q: I thought there were only two different types of life insurance policies, term and whole. What types of life insurance are available and how do they differ from one another?
A: The Problem — Understanding Different Types of Life Insurance Policies. The life insurance industry has created a myriad of solutions for different needs. Whether life insurance is used to replace income, pay a mortgage, pay for a college education or as an estate planning vehicle, the type of policy implemented should be customized to meet your needs and budget.
The Solution — Differentiating Between Policy Types. There are two basic categories of life insurance, term and permanent. Term may be appropriate if you only need protection for a limited time, such as the life of a mortgage or the time leading up to and the completion of a college education. Permanent may be appropriate if you need lifetime coverage. Let’s look at a variety of the most common types of term and permanent policies.
Return of Premium bLife Insurance/b – Compare prices bROP/b Term Life b.../b
For a long time, I had a bad opinion of return of premium (ROP) life insurance : while the insurer refunds the premium all at the end of the period of coverage (if the insured is still alive), it is understood that, POR had significantly higher rates of term life insurance rates. This means that a great deal of money is required by contracting for a period of 5-30 years. If he or she do better to buy the without insurance and invest the difference anyway?
Compare Life Insurance with ROP Term Life Insurance
First, a fund for the unfamiliar POR: the return of the prize is a racial term life insurance, a policy which is not maintained indefinitely, but must stop after a certain period.
Pro: Compare the return of premium term ordinary > Insurance structurally, and see what the difference is only in case the insured survives the entire period reported, the owner of a common policy gets nothing, while the owner of a policy the ROP will be refunded all the money spent on policy.
By: return compared to ordinary risk insurance premium cost-wise, and it turns out that the rates of return of insurance premiums are much higher> Care Insurance Rates. How high? Although I would like to have something else for me later, was the first comparison I was quoted three times more for the assurance of ROP, and when I heard that I thought was done POR.
Can ROP Life Insurance prices too high?
As I suggested in my opening remarks, yes. Constraining the money for a period of 5-30 years is a significant disadvantage because they do not have interest rates can that money. To give an idea of how the interest that reflect the interest of the press) is the only source of money for insurance the insurer to cover its costs ROP (death claims, administration, profit, etc. . (Because the insurer all premiums back, or worse, is a case of death, there must be a lot of money to make investments, to pay premiums while in their possession.)
