Whole Life Insurance Basics

If you're shopping around for life insurance, you start with two big questions: How much insurance do I need? And what type of policy should I buy? When you've calculated your short- and long-term obligations, it's time to decide what type of policy is right for you: term life or whole life insurance.

Term life insurance provides coverage for a specified period of time, such as 10, 15 or 20 years; premiums go up over time unless you buy a "level term" policy, which guarantees that premiums stay the same. It's possible that you could outlive the term of your policy, in which case your policy expires and you'd have to shop for another policy if you wish to still have coverage. With a whole life policy (also called permanent insurance), you don't have to worry about possibly outliving your policy term because your contract gives you coverage for your entire life, as long as the premiums are paid. With a whole life policy, unlike term life, you also build up "cash value" in the policy that you can tap in the future. Premiums are significantly higher for permanent insurance than term life due to charges and fees (see sidebar) that you don't pay with term life. Cash value is a crucial selling point for whole life: It's an account within your policy that builds up over time, tax-deferred, fueled by a portion of your premiums and interest paid by the insurance company. In fact, the whole life contract is designed for you to take advantage of that money in the future. When you die, your beneficiaries receive the death benefit, not the cash value, with the exception of some universal life policies. Whole life insurance policies build up cash value slowly at first but then pick up the pace after several years, when your earnings start to grow faster than your "mortality" cost (the cost of insuring you). If you would like whole life insurance explained in more detail, your life insurance agent should be able to show you a few types of policy illustrations.

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Auto Insurance Principles Should Apply to Health Insurance

Many Americans rely on their automobiles to get to work. No automobile means no job, no rent or mortgage money, no food. A single parent, struggling to make ends meet in the suburbs with 100,000 miles on the odometer, would presumably welcome the guaranteed opportunity for low-priced insurance that would take care of every possible repair on her auto until the day that it reaches 200,000 miles or falls apart, whichever comes first. Especially if the insurance is valid regardless of whether she even changes the oil in the interim.

So why aren't the auto insurance companies writing such coverage, either directly or through used auto dealers? And given the importance of reliable transportation, why isn't the public demanding such coverage? The answer is that both auto insurers and the public know that such insurance can't be written for a premium the insured can afford, while still allowing the insurers to stay solvent and make a profit. As a society, we intuitively understand that the costs associated with taking care of every mechanical need of an old automobile, particularly in the absence of regular maintenance, aren't insurable. Yet we don't seem to have these same intuitions with respect to health insurance. If we pull the emotions out of health insurance, which is admittedly hard to do even for this author, and look at health insurance from the economic perspective, there are several insights from auto insurance that can illuminate the design, risk selection, and rating of health insurance. Auto insurance comes in two forms: the traditional insurance you buy from your agent or direct from an insurance company, and warranties that are purchased from auto manufacturers and dealers. Both are risk transfer and sharing devices and I'll generically refer to both as insurance. Because auto third-party liability insurance has no equivalent in health insurance, for traditional auto insurance, I'll examine only collision and comprehensive insurance -- insurance covering the vehicle -- and not third-party liability insurance.

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Cheap Insurance

Insurance is a form of contract whereby periodic payments (also known as insurance premiums) are made to an insurance company, in order to provide an individual or business compensation in the event of property loss or damage.

The main purpose of insurance is to protect yourself or your family against the financial impact of a tragedy. In general, it is contract in which one party agrees to pay for another party's financial loss resulting from a specified event. Insurance mainly consist of three things - insurer, insured and policy. An entity seeking to transfer risk (an individual, corporation, or association of any type) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, defined as an insurance 'policy'. There are two main ways to buy insurance. The first one is directly through an agent and the second one is to do it yourself. The main advantage of buying insurance from other is that an honest and competent insurer will decide according to the situation and make suggestions. The advantage of going on your own is that less money is needed for it. While buying any type of insurance, a person will save money by paying annually or semi-annually. Sometimes buying several types of insurance from the same company will save money. There are different types of insurance available in the market. Life insurance is a form of insurance that pays monetary proceeds upon the death of the insured covered in the policy. There are main two types of life insurance that are term insurance and permanent insurance. The medical insurance policy is a non-life insurance policy, which covers the expenses incurred by an individual in case of an injury or hospitalization. Individuals have to pay a minimal premium for buying medical insurance. Its main types are indemnity plan, preferred provider organization and health maintenance organization. Homeowner insurance policy covers property and contents. There are two kinds of Homeowners Insurance policies and these policies can be divided into two categories named-Peril Insurance and all-risk insurance.

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What is Home Owners Insurance

Home owners insurance rates vary widely based on your geographic location. Areas prone to hurricanes, floods, hail, earthquakes, fires and other natural disasters will generally have higher rates. Even the distance to the nearest fire department or fire hydrant can have an impact on your home owners insurance rates.

Generally, dwelling coverage is based on replacement cost, which means that in the event of a total loss, the policy will provide reimbursement, up to the policy limit, to replace the structure. Ideally, a homeowner should buy enough insurance to completely rebuild the home, known as replacement value. This figure may not be the home's actual market value or what the owner originally paid for the home. This is especially true in a depressed or an inflated market or if the home is simply not replaceable to its condition prior to the loss. Replacement cost policies, which may pay over the policy limit to rebuild the home, may be available from your insurer. To determine how much insurance to purchase, an accurate appraisal of the home for replacement cost should be made. Working with your insurance company is important in this process. Most insurers recommend or require that a homeowner insure the dwelling for 100 percent of its full replacement value. Some homes, very unique ones such as national register-types or very elaborate ones, cannot be insured for exact replacement since some features are not replaceable in either workmanship, materials or practical costs. The insurer and/or the agent is the best source for these issues. Coverage for personal property is different. Most policies provide actual cash value coverage for contents which includes depreciation, or full value contents without depreciation. Actual cash value means that if a power surge blows out a 10-year-old television set, the homeowner should know what to expect. Unlike full value contents coverage, which would essentially provide a new television set, actual cash value coverage allows the insurance company to calculate the useful life of the item and then depreciate the item to present value. A depreciated 10-year-old television set would be insured for only a fraction of its original cost. A homeowner may want to consider replacement cost coverage to be sure that the contents are adequately insured.

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