The first thing you must know is that there are many types of life insurance plans. Basically, a life insurance policy provides two income streams:
* Protection (coverage)
* Savings (cash value)
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When we group them according to the premium we have to pay for the protection we get, then we find that there are, finally, three types of life insurance policies. We can name those three groups as follows:
* Policies HP-LC: High Protection and Low Cash Value
* Policies MP-MC: Medium Protection and Medium Cash Value
* Policies LP-HC: Low Protection and High Cash Value
High protection will give your loved ones the best coverage if you don’t have the chance to live long enough.
High cash value will give you and additional very useful coverage for yourself, if you live long, which, in a certain sense, is also protecting your family, as your children, when grown up, won’t have to spend the money of their own families to support you.
How much Protection and how much Cash Value should you mix in your life insurance policy?
If you had a fortune teller who could foresee your life length, you would have your problem solved. If she says that you will live a long life, you should engage yourself in a LP-HC policy type, as an endowment type. On the other hand, if she tells you that your life will be short, you should then shop for a HP-LC policy type, a a term life insurance.
But, the truth is, as you don’t know about your future, the wisest decision is a balanced type of death coverage and cash value, such as some type of whole life insurance policy, or a well designed universal life insurance plan.
For a well balanced MP-MC type life insurance policy, the total premium that we will have paid will, in most cases, match the total cash value after 15 to 20 years. That means that after we paid the insurance premium for for that time, we could get back all the paid money, if we surrender the policy.
If our sincere commitment is to show our family how much we love them, buying insurance doesn’t have a high cost. The real cost will only be interest rates you will have lost in 15 years. Because after that period, you can think of your life insurance as a free policy.
As you can see, cheap life insurance is not an exact science, but there are some helpful guidelines to help you pick the best option. We have many more Insurance Help Articles Now Available.