The Various Types of Life Insurance

Life Insurance comes in many forms and is often the subject of confusion. In the following article we attempt to clear up some of the confusion surrounding the various types of life insurance. However, the article is not exhaustive; therefore the reader is encouraged to seek professional advice if they have further interest in the topic. There are numerous sites online that offer valuable information on insurance.

Term Life
Term Life Insurance, is a relatively straight-forward product that has a fixed term - say 10 years or 20 years etc. A 10-year term life insurance policy provides protection for 10 years; a 20-year policy for 20 years and so on. The amount paid out is called the death benefit and is paid upon death. Unlike a whole life policy, this form of insurance does not accumulate any savings or cash value.
Premiums can be paid monthly, quarterly or annually. If the policy is cancelled before the owner dies, there is no payout.

Policy holders have the option of choosing from a number of policy duration. Some common duration is: 1, 5, 10, 20, and 30 years, depending on the insurance carrier. Term life premiums are usually lower than other life insurance premiums, due to the fact that there are no provisions for cash value or savings. Once the policy is set up the premiums are usually fixed for the duration of the initial term.

When the term runs out, many companies will give you the option to renew your policy, but the premiums will be higher for the same coverage, since age plays a role in premium cost. The basic concept is that an older person is likely to die sooner than a younger person and this is factored into the premium cost.

Permanent Life Insurance
Permanent or whole life Insurance provides protection for the life of the policy holder. Providing the premiums are paid, the death benefit will be paid as agreed.

Most people feel they don't need life insurance after the kids have graduated from college and the mortgage has been paid off. But in reality, your surviving family will still have to deal with your burial expenses as well as their own living expenses for however long they live, without your help. Your family's survival period could be as much as 10, 20 or more years.

Whole Life insurance also bundles the death benefits with the opportunity to build savings tax-deferred. Each month the premium is paid, a percentage of the premium is invested by the insurance company. This investment builds up a cash value, which you can use in several different ways; such as by way of taking a loan, or by surrendering the policy and taking the accumulated cash value. If a Loan is not repaid it will be deducted from the final payout at death.

With all permanent life insurance policies, the cash value is different from the policy's face amount. Cash value is the amount available if you surrender a policy, while face amount is the money paid by the insurance company at your death. Premiums for permanent life insurance are generally higher than for term life insurance because of the cash value cost and administration. However, as mentioned above, the younger you are when you buy the insurance, the lower your premiums will be.

Types of Permanent Life Insurance
The Following are common types of Permanent Life Insurance:

Whole Life Insurance
Whole life insurance are designed to last an insured person's entire life. The amount of the premiums generally remains the same over the duration of the policy and must be paid timely for coverage to continue. The insurance company invests part of your premium in its general portfolio to build the cash value of your policy. Whole life is the most common type of permanent insurance, and has a fixed guaranteed rate and guaranteed cash value.

Universal Life
Universal life insurance also covers the insured life, providing the premiums are paid. Part of the premium covers the cost of the policy, and the remainder is invested in the insurance company's general portfolio to earn interest tax-deferred. This type of insurance usually guarantees a minimum interest rate on the invested portion. After your first premium payment, there can be variations in the date you can pay premiums, and in the amount paid, proving it meets the policy's required minimum and maximum payment. You can also reduce or increase the death benefit more easily than with a whole life policy.

Variable Life
Variable life insurance incorporates investing. You can invest your premiums in the stock, bond, and money market funds that you choose from the insurance company's portfolio. While the cash value of variable life policies is not guaranteed, you have control over how your money is invested. The cash value and death benefit of your policy are determined by how well your investments are doing. This type of life insurance usually has fixed premiums.
The ideal coverage for a consumer depends on his or her particular situation. A good Insurance representative can give guidance in making the right choice.

The Fundamentals of accounting

Part 1-The accounting equation

It is important that all organization keep records of their resources, resource uses and claims. These resources are known as assets, and represent the things of value that the company owns.

There are financial assets such as Cash and Account Receivables and non-financial assets, such as machinery and office furniture.

The business assets can be obtained from money contributed to the business by its owners to expand operations. Borrowing from a bank also creates an asset-Cash- and also a liability --note payable. The business also incurs an asset-Inventory- and a liability -Accounts payable or notes payable when merchandise inventory is acquired.

A net increase to assets is obtained when the inventory is sold at a price higher than that at which it is bought, plus the expenses of sale.--resulting in a profit. Profit is the motive of all business-type organizations. This form of organization is distinct from a not-for-profit organization,such as a ccharity or a church.

The difference between assets and liability is called Equity or Capital. Capital can also be introduced to the business when the owner of a LLC or partnership makes a contribution to the business.

We derive the accounting equation from these three elements-asset, liability and equity.
The equation is: Assets = Liability + Equity--meaning that the assets of an entity is equal to the resources of those assets: which is the liability and equity.

Thus, at any given time in a period, a financial statement can be prepared showing the assets on one side and the liabilities and equity on the other side. This statement is called a Balance Sheet, and represents the status of the financial position of a business. Some non-profit organization also refers to this statement as a statement of financial position.

Equity will be changed (increased) when an asset is sold for profit, and will be decreased when an item is sold at a loss. The profit or loss is arrived at by comparing the revenue derived from the sale with the expenses incurred to make the sale.


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-----Our next Accounting article will deal with the accruals concept of accounting------