A life insurance policy offers peace of mind and ensures that your beneficiaries are provided for in the event of your death, disability or serious illness. Life insurance can also be part of a retirement investment portfolio.
As retirement nears, you should give serious consideration to the various protection options and investment benefits offered by various types of life insurance:
• Whole Life Insurance: A whole-life policy is part life coverage and part investment fund. A whole life policy pays a stated, fixed amount upon death, and part of the premium goes toward building cash value from investments made by the insurance company. Cash value builds tax-deferred each year that you keep the policy, and you can borrow against the cash accumulation fund without being taxed. The amount you pay usually doesn't change throughout the life of the policy.
• Universal Life Insurance: Universal life combines term insurance with a money market-type investment that pays a market rate of return. Universal life policies generally don't guarantee a certain rate.
• Variable Life and Variable Universal Life: These are permanent policies with an investment fund tied to a stock or bond mutual-fund investment. Returns are not guaranteed.
• Term Insurance: Another type of life insurance is term insurance, which has no investment component. The life coverage lasts for a set period of time provided you pay the monthly premium. Annual-renewable term is purchased year-by-year.