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Ordinary Life Insurance

by Jeff Rose on January 2, 2013 · 0 comments

Ordinary Life InsuranceOrdinary life insurance, also known as straight life insurance or whole life insurance, is defined as “insurance on the life of the insured for a fixed amount at a definite premium that is paid each year in the same amount during the entire lifetime of the insured.”

Although calling this type of insurance “ordinary” life insurance implies that it may be plainer or some how less of a premium policy, there are many benefits to this type of insurance.

First, cash paid into an ordinary life insurance policy, up to face value of the policy, is accessible throughout the duration of the policy. Besides peace of mind that a life insurance policy provides, this can be a huge benefit. With most insurances, such as health, vision, or dental, you experience benefits from the insurance while you are living. Even with automobile insurance, if you never have a wreck, you are still protected from the extremely expensive tickets you can get when you do not have auto insurance.

Benefits of Ordinary Life Insurance

However, with life insurance, you rarely experience benefits besides peace of mind. Instead, your family receives benefits after your death. However, with the cash value loans that are available with ordinary life insurance policies, if you are ever in a bind you can borrow money against the cash value that you have already paid, completely tax free! You can pay it back in addition to the premiums when you are able, and if you still have outstanding loans at the time of your death, it is simply subtracted from the remaining pay out balance.

Another great benefit of ordinary life insurance is that the premiums are fixed. That means that payments are predictable, although the younger you are the higher the premiums may be, in order to reduce the insurers risk that payments will not be significantly less than the amount paid out should the policy holder die prior to the average life expectancy.

Taking Care of the People You Love

Ordinary life insurance policies also offer guaranteed death benefits. Although the longer you pay into the policy and fewer policy loans you take out, the higher the ultimate payout upon death may be, there is still a certain amount of the policy that is guaranteed at any time.

These policies also have the benefits in that annual premiums related to mortality and expense payments do not change. In other words, as age increases, health generally declines, and therefore the policyholder becomes less insurable. However, with fixed annual premiums, the policy becomes more affordable. The downside is that the younger you are, the less competitive the rates are.

You can also pay additional money into the policy to go to the named beneficiary upon death if you are concerned that your policy may not cover all expenses.

The best part of ordinary life insurance policies is that they are straightforward and easy to use. They are simple and can provide tax-free loans while the policyholder is still alive.

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