These are both for expats and locals, I will explaing the different types of life insurance and what they are and how it might fit your specific situation or what you are looking for.
Temporary Life Insurance
Temporary life insurance is known as term life insurance and is similar to paying rent. With term life insurance the purchaser pays premiums that provide a guaranteed death benefit to a beneficiary if the insured dies during a specified period of time.
If the insured does not die during this period, she has the option to renew the insurance policy, although renewing will be much more expensive because the insured is now at a higher risk for death.
Whole Life Insurance
Whole life insurance is an insurance product that has an insurance component and an investment component. Because of this additional benefit, it is much more costly than term life insurance.
A whole life insurance purchaser pays set premiums, which are locked in over her life, and the insurance company guarantees a minimum amount of payout when someone dies. With whole life insurance, the insurance company guarantees the recipient a minimum cash value even if the recipient stops paying into the policy.
Like an annuity, a whole life policy protects the beneficiary in the event of the insured’s death and also is a way to grow savings. The cash value of the account grows tax-deferred at a minimum, guaranteed rate. Similar to how a fixed annuity operates, the insurance company draws from a general account, and if the general account does well, the cash value may grow more than the guaranteed rate.
At any time, the policy owner may withdraw part of the cash value or borrow part of it.
Universal life insurance is a type of whole life insurance that provides the purchaser with more flexibility in terms of the death benefit and the premiums. Universal life insurance premiums can be adjusted depending on the amount of coverage the purchaser desires, allowing her to save money if she decides she or the insured doesn’t need as much coverage.
Variable Insurance
With a variable life insurance policy, the death benefit, as well as the cash value of the policy, fluctuates depending on the investments chosen by the client. For variable life insurance contracts, insurance companies invest the premiums paid into both their general accounts and their separate accounts.
In this way, variable life insurance is like a variable annuity or a mutual fund. The separate account allows the investor to select from a variety of investment choices. This means the investor takes on some risk in exchange for the potential to grow the cash value of the account. The cash value of the account is based solely on the performance of the subaccounts. If the subaccounts increase by 5%, the cash value increases by 5%.
Similarly, if the subaccounts decrease by 5%, the cash value decreases by 5%. The cash value is not guaranteed by the insurance company.
The insurance company does provide a minimum guaranteed death benefit that comes out of the insurance company’s general account. The death benefit may rise above the minimum guaranteed amount, depending on the separate account performance, but it will never drop below that minimum.
How much the death benefit rises will be based on the performance of the separate account but also on an assumed interest rate for the account. If the subaccount performs better than the AIR, the death benefit will grow. If the subaccount performs worse than the AIR, the death benefit will shrink.
