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GUARDING AGAINST THE FINANCIAL PITFALLS OF DEATH

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reasons to purchase term insurance. However, the cost of the premiums continues to go up as you grow older and renew your policy. This cost is what drives people toward whole life, or another form of permanent insurance, and away from term. It’s also the reason why many people let their policies lapse and even go without any type of coverage.

Recently, the insurance industry has begun to offer a 30-year term policy, which helps combat the cost problem. By purchasing a 30-year level term policy, you could theoretically have the same cov- erage into your old age for the same premium amount. It’s important to make sure that your policy locks in the premium amount for the life of the policy, if that’s the way you decide to go. Remember, though, that no matter what the cost of term insurance, its objective is to provide a large amount of protection for an affordable cost over a specified amount of time.

CASH-VALUE LIFE INSURANCE

This is a vast category that includes whole life, and universal life, as well as variable universal life policies. The aim of this type of policy is to develop a cash value within the insurance contract. The cash value develops because of the level-premium approach to paying for this type of protection, as opposed to having the premiums increase over time, as is the case with term insurance. Cash-value policies may be split into different categories. For our purposes here, we dis- cuss the three basic types of cash-value insurance: whole life, uni- versal life, and variable universal life.

WHOLE LIFE INSURANCE

This type of insurance policy covers the insured’s whole life, thus the name “whole life” insurance. Whole life not only offers a death ben- efit, but it also offers a cash value feature. This cash value is the result of the investment of paid-in insurance premiums. Therefore, the insured also earns a modest return on the premiums paid for the insurance policy. The rate at which the cash value grows is usually fixed, but is generally guaranteed to be more than a set minimum

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