Frequently asked questions regarding insurance related personal finance topics
Q: What is term life insurance?
Term insurance is the least expensive type of life insurance you can buy. It is often referred to as "pure" insurance because there is no savings or investment component as there is with, for instance, whole life insurance. Taking out a $300,000 term life policy means $300,000 will be paid as the death benefit to the beneficiary.
Q: What is whole term life insurance?
Sometimes called a cash value policy, a whole life policy consists of two parts: a death benefit component and an investment and/or savings component. When you pay your premium on a whole life policy, part of it goes towards the death benefit, the remaining goes towards the investment/savings feature. The policies have what is called a cash surrender value, the amount you will receive if the policy is cancelled.
Q: What is the difference between term and whole life insurance?
The sole purpose of a term life policy is to pay a lump sum benefit to a beneficiary upon the death of the policyholder. A whole life policy, on the other hand, has both a death benefit and an investment component. Consequently, whole life premiums are more expensive than term polices, since part of the premium goes towards the death benefit, and part goes towards the investment component. For more insight on this subject, please see the article difference between term insurace and whole life insurance.
Q: Am I required to have auto insurance on a teenager?
Under all state laws, anyone operating a vehicle must be covered by an automobile insurance policy. A teenager who becomes newly licensed should be added as a driver to an existing policy, or set up with their own individual policy.
Q: What is comprehensive auto insurance?
Comprehensive auto insurance coverage is a component of an auto insurance policy, and is optional in most states. It pays for repairs or replacement of your car if it is damaged not only by a collision, but by any other circumstances. This includes fire, vandalism, theft, and so-called "acts of God"lightning, a fallen tree, flood, and other natural disasters. Comprehensive insurance also covers the damage your vehicle inflicts on another person's vehicle or property.