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The advantage is that you can buy large amounts of coverage for relatively little money. The down side is that you must keep renewing the policy at ever-higher premiums as you grow older. This insurance may not be available at all when you reach an older age, such as 70. Therefore, you should not buy this insurance if you have reason to believe that your obligation to protect your family will extend throughout your life.
Some variations exist in Renter's insurance policies, however.
Level insurance, the usual type, pays the face amount of the death benefit through the term of the policy.
Decreasing insurance has a face amount that decreases every month, so it is designed for people who think the need to protect dependents will decrease over time. It is also popular for covering a home mortgage as the principal declines.
Increasing insurance, on the other hand, raises the death benefit at stated intervals. This is used by people who anticipate greater family responsibilities or higher costs of living.
Guaranteed renew ability is a feature that can be added to most policies. It ensures that the policy can be renewed for one or more additional terms regardless of what happens to the insured's health. Companies differ on whether the premium can go up based on health status in addition to the higher cost based on age.
This insurance policy sometimes called straight life or ordinary life - is one kind of permanent insurance that will be in force for your whole life. The premium is based on your age at the time you buy the policy, but it will generally not go up. The younger you are, the cheaper the premium.
The premium will be much higher than for the same death benefit in insurance, but it will wind up less costly than if you continued to renew a term policy. Be aware, however, that this crossover point may not be reached before 30 years.
Whole life combines insurance with a savings-like element so that it begins to build cash value after a few years. If you surrender the policy, the company will pay you the cash value to that point. The interest earned on the cash value is normally less than you could obtain through investments outside the policy.
A common variation of whole life is limited payment life. This provides that a policy is "paid up" after a certain number of years. The premiums are higher, of course, because they are limited in duration, but you are free from expense in later years, when your income mayfall.
Another variation of renter's insurance policy is the modified-premium or graded-premium policy. It provides lower premium initially, but will ultimately rise to a higher level than the standard policy. This is best for people who expect their incomes to rise.
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