No, this isn’t a blog post about what kind of girlfriend you’re hoping to find. It’s much more mundane than that, but may be just as important.

I’m talking about life insurance.

One of the frustrating things about life insurance is all the specialized terms. Over the years, life insurance has changed as peoples’ needs have changed and as laws have changed. This has led to a veritable quagmire of products that the average person doesn’t have the knowledge or the desire to wade through.

One if the areas that differs between life insurance policies is how the premiums are paid. There are single premium policies, fixed premium policies and flexible premium policies.

Single Premium

A single premium policy is one that’s paid for by a single lump sum when the policy is first acquired. There are single premium whole life policies that will last through your whole life, and there are single premium term life insurance policies that you pay once and they cover you for a certain period of time. A single premium policy can be less expensive than the other types of policies.

At one time, single premium whole life policies were especially attractive from an investment perspective. Changes that were made to the tax code in 1988, however, pretty much put a halt to that popularity.

Fixed Premium

A fixed premium policy is one where you continue to make premium payments, but the price is fixed. As long as you make the payments, you have coverage. In some cases, a fixed premium policy may only require you to pay in for a given amount of time, after which the policy is in effect forever (in the case of a fixed premium whole life policy) or for the length of the term (in the case of a fixed premium term life insurance policy).

Flexible Premium

A flexible policy lets the person holding the policy pay variable premiums. The variations usually relate to the amount of cash value in the policy, and only whole life policies tend to be flexible. This means that a policy holder could, in effect, skip payments from time to time as needed, as long as the policy has cash value enough to cover it.

Photo via sergis blog