Types of Life Insurance

No one likes to think about death,but it is necessary to make plans for your family’s well being in the event of your passing. One of the best ways to do this is by purchasing life insurance. Life insurance will help to make sure that your family is properly taken care of after your death. In order to select the right type of life insurance and get the best life insurance rates,you have to know the options that are available to you. 

Here is a list of the most popular types of life insurance:

Term Life Insurance

Term life insurance is life insurance that is valid for a specific time period. The term could be as short as one year or as long as ten years. The policy has to be renewed for it to remain in effect. Benefits are only payable if the insured dies while the policy is in effect. If the policy lapses,then the policyholder will receive no benefit and will lose out on all of the payments that they have made

Term insurance is the most popular form of life insurance because it is affordable for so many families. That’s the biggest advantage of it. Term insurance allows many individuals to get coverage that they could not afford otherwise.  The disadvantage is that premiums tend to rise as you get older.

Whole Life Insurance

Whole life insurance is exactly what the name implies. It is a life insurance policy with life insurance coverage that covers an individual throughout their whole lifetime. Most whole life insurance policies require that the policyholder makes annual premium payments. These payments are used to pay off the policyholder’s beneficiaries at the time of death.

Whole life insurance has an advantage over term insurance –it offers a cash surrender value. The cash surrender value is the amount of money that a policyholder can withdraw from their insurance plan. It can be borrowed against in the form of a loan. The entire policy can be cashed in and the policyholder will receive a cash payout equal to this value.

Universal Life Insurance

Universal life insurance is a hybrid type of insurance. It is similar to term insurance in that it offers a low cost insurance. Universal life insurance is very similar to whole life insurance in that it offers a cash savings component. One of the advantages of universal life insurance is that you can adjust the policy as your needs change.

The policyholder has great flexibility on their premium payments and death benefits. The death benefit can be increased or decreased by the policyholder. If a policyholder wants to increase the death benefit,they would have to increase their premium payments. Benefits could be decreased as well by lowering the premium payments. Universal life insurance also allows the interest from the accumulated cash savings to help pay premiums.

Variable Life Insurance

Variable life insurance has been called the most expensive type of life insurance because it has an investment component to it. When comparing life insurance,variable life lets you place a portion of your premium payment into a separate account with your insurance company. This separate account is composed of a number of different asset classes with mutual funds being the most popular option.

Limited Pay Insurance

Limited pay life insurance is a form of whole life insurance that allows you to pay up the policy in advance. All of the premiums are paid over a specific time period. This time period could be 10,15,or 20 years. After the policy is paid up,no additional premiums are due for the lifetime of the policy. This enables the policyholder to prepay for their death benefits.

Endowment Insurance

Endowment insurance pays out a lump sum of money to the policyholder after a specified period of time. The policyholder buys this policy and can hold it until the date of maturity. The date of maturity is typically after a certain number of years or when a policyholder reaches a certain age. The policy also has a cash surrender value which allows the policyholder the right to cash the policy in early.

So despite the fact that thinking about death is no fun at all,at least you now have a resource that enables you to understand the different types of life insurance.  You can look around for answers to more frequently asked life insurance questions.