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Life insurance isn’t anything that anyone really wants to give a lot of thought to. It’s unpleasant to think about what life insurance is actually for, but unfortunately, it’s something that everyone should have in order to help protect their loved ones and give oneself and their family peace of mind. Buying life insurance can be a complicated and sometimes difficult process, as there are so many things to consider and so many options as well. However, breaking life insurance down into the main types and the coverage that comes with them is something that can help make it easier. There are several different kinds of life insurance to consider, and it’s important to figure out which one would best benefit you.
All life insurance falls into two main categories: term life insurance and permanent life insurance. While term life policies come to an end after the term has expired, permanent life insurance has an indefinite period as long as the premiums are paid. Just like life insurance in general, permanent life insurance falls into two categories as well: universal life and whole life insurance.
Term life insurance is one of the most popular forms of insurance. It is simplistic and affordable, meeting the needs of many. It works when the insurance company makes an agreement to pay a pre-disclosed sum, also known as a death benefit, if you were to pass during the term that’s stated in the contract. In order to keep the contract from expiring, premium is paid. With traditional term life, premium and death benefits are both stated at the time the policy is written and never change. However, it’s important to remember that at the end of the term, the payments made and the coverage will come to an end, although you may have the option to renew your policy. With most term policies, if you pay into it and then are still alive at the end of the term, you don’t get your money back and no benefit is available.
Whole life insurance policies are essentially the simpler version of permanent life insurance. It’s different from universal life insurance in the respect that it has a death benefit and that it has a cash value that is guaranteed to be a fixed amount.
Whole life policies guarantee that the amount of the death benefit and the amount of the cash value you’ve paid will increase over time, but you will not experience a change in premiums. This is one of the key elements that is different from other permanent life policies.
Universal life insurance policies, which is the second type of permanent life insurance, is known for being the more flexible of the two. The premiums that you pay into universal life policies are not guaranteed by a payment plan and you can pay as much as you want to and whenever you want to. This does make it a more financially attractive choice as an investment, but managing this kind of policy does put more responsibility onto the insured, versus whole life where the insured only has to focus on paying the premium. The premium paid is invested so that you can see a more lucrative return on your premium.
Some things can affect universal life policies, like death benefits, premium amounts, and the types of death benefits. Talking to an insurance agent about the flexibility and details of a universal life policy is the best way to learn about its options.
There are other types of life insurance, most commonly known as “special risk” policies. These are usually significantly more expensive because of the ‘groups’ they’re made for; usually groups of people that are considered special risk due to higher mortality rates. Some of these include policies such as smoker’s life insurance, senior life insurance for those over fifty, life insurance that doesn’t require an exam if you’ve been denied in the past, and high risk insurance for those who have terminal illnesses or high risk jobs.
Finding the best kind of life insurance for you is something only you can figure out. Talking with a life insurance agent and choosing a policy will give you peace of mind and help you feel secure about the future.