What Are The Main Types of Life Insurance?
The type of life insurance coverage you choose depends on your situation. You might only need to cover the cost of your funeral. Or, you may want to ensure your family has long-term financial stability. Fortunately, there are several options to help you secure your loved ones’ futures.
The six different types of life insurance include:
- Whole life insurance
- Term life insurance
- Universal life insurance
- Variable life insurance
- Burial life insurance
- Mortgage life insurance
Whole Life Insurance
Whole life insurance is a type of permanent life insurance. This means you’ll get coverage for your entire life, provided you make premium payments.
A whole life policy is generally the simplest permanent life insurance option. The death benefit, or coverage amount, remains the same for the duration of the policy.
In addition, whole life policies have level premiums, so your insurance rate won’t go up over time.
Whole life policies don’t need a lot of management — you simply set up your policy and enjoy the benefits. For example, whole life policies guarantee a rate of return on the cash value you build.
While your cash value growth may be slower than other permanent life insurance policies, a fixed interest rate makes it easier for you and your beneficiaries to plan ahead. However, these guarantees often make whole life policies the most expensive type of life insurance.
Getting multiple quotes from the best whole life insurance options whole life insurance optionss helps you find the most affordable rates.
Term Life Insurance
Term life insurance policies offer straightforward life insurance coverage for a set number of years. This simple type of life insurance is often the most affordable option for many people.
A term policy works by choosing the length of time the policy is active and the death benefit amount. The length of the policy, or term, is the period of time the policy provides coverage.
Terms are often measured in set numbers of years, or policies are in place until you reach a certain age. For example, a 30-year term policy purchased in 2000 would expire in 2030.
An age-based term policy, on the other hand, expires when you reach a specific age, such as 65 or 70 years old. The policy expires at the end of the term.
If you need longer coverage, you may want to choose a renewable or convertible policy. Renewable policies let you renew your coverage at the end of the term, while convertible policies let you convert your policy to permanent coverage.
Term policies don’t have a cash value component, so the death benefit payout is the only amount of money your beneficiaries receive. However, this makes term life insurance one of the most affordable types of life insurance policies.
In general, term life insurance premiums are much lower than permanent options. The simplicity of term insurance also means there are lots of options, making it easy to find cheap life insurance companies for your policy.
Universal Life Insurance
Universal life insurance, also called adjustable life insurance, offers permanent life insurance with flexibility. These policies let the insured person adjust the death benefit and premium amount, within policy limits.
Most policies also include a cash value component. However, the rate of return on the cash value is not guaranteed. Insurance companies use current market rates to determine the rate of return on cash value. The good news is this non-guaranteed return often makes universal life policies more affordable than other permanent options.
The adjustability of universal life products also makes them appealing to many insurance shoppers. With universal life, you can change your insurance policy to meet your current financial situation.
Additionally, the generally lower costs of universal life policies could help you secure lifelong coverage for less than other permanent insurance products. For example, suppose you unexpectedly lose your job.
With a universal life policy, you could adjust your premium payments to the minimum amount to keep the policy active. While you’ll stop building cash value, you’ll keep your life insurance coverage at a lower cost. Once you secure a new job, you can increase your premiums to start accruing cash value again.