Life Insurance Center
What Are The Types Of Life Insurance?
Article 2 of 14 in How to Find the Best Type of Life Insurance
There are two basic types of life insurance policies, each'with a few variations. The main types of life insurance policies are: Term Life and Permanent Life, which includes Whole Life, Universal Life, and Variable Life. What type you should buy depends on your needs, your age, your budget and the goals you are trying to achieve with the life insurance. Learn about each type, and do further research on the type that best meets your needs before you make a purchase.
TIP: You can discuss your options with a reputable insurance agent. Ask an insurance agent what type of life insurance is best for you.
Term life insurance is for a specific term or period of time. You might purchase this type of life insurance to cover a specific time period in your life, for instance, when your children are young. Most insurance companies offer term life insurance as'5 year, 10 year, 20 year or 30 year term. After your term expires, the life insurance does too and you will need to renew or change policies.
Term life insurance provides only a death benefit to your beneficiaries, and does not provide a cash value account. However, you can invest the money you save on insurance premiums or you can use it to meet other budget needs.
Term life insurance is the cheapest type, and the most flexible as you will be able to renew when your needs and circumstances change.
In contrast to term life insurance,'permanent life insurance accumulates throughout your life at a fairly consistent rate. It is generally more expensive than term life, but offers'more than the death benefits. There are three common types to choose from:
- Whole Life Insurance: Whole Life is permanent life insurance that lasts for the rest of your life. The premium rate is higher than term life, but does not change throughout the life of your policy. A whole life insurance plan can also accrue value that can be borrowed against in a time of need or used to purchase additional insurance.
- Universal Life Insurance: These policies incorporate an investment and savings vehicle that offers both life insurance and a tax-deferred interest accumulating savings account that is separate from the death benefits. Your premium rate can vary within a certain amount, and you can adjust the death benefit depending on the value in your savings account.
- Variable Life Insurance is permanent insurance that also has an investment component. Your cash value is professionally-managed in different funding options such as stocks and bonds. It is similar to universal life insurance, but'instead of a savings account your money is invested. This has greater reward and risk potential.
The permanent life insurance policies with savings and investment options are complicated and have risks associated with them. Some, if not managed correctly, could ultimately run out of funding and eat up your death benefit leaving you with no insurance coverage. Therefore, before buying any life insurance policies you need to compare term and permanent life, determine which is right for you, and shop for the best life insurance policy for your needs and budget.
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