Types of Life Insurance Policy
Life insurance is a good investment to protect your family from burdening expenses in the event of your unexpected death. There are four main types of life insurance policy available, so let’s review.
Term Life Insurance
The most popular an inexpensive of the types of life insurance policy is term life insurance. Term means you purchase coverage on a certain timeframe, such as 10 – 30 years of life. Your beneficiaries will receive payment only if you die within the selected timeframe. It typically provides the best amount of coverage for the lowest premium payment of all types of life insurance available. It is best to buy when you are under 40 years old, as it may be more expensive if purchased at an older age. Once the term ends, you must renew or lose your insurance. Keep in mind that if you renew, your premium payment may increase.
Whole Life Insurance
Whole life insurance is one of the types of life insurance policy that covers your entire life. It pays the death benefit and may provide a cash value that is redeemable. It never has to be renewed and your premium will remain the same for the entire lifespan. There are dividend-paying whole life polices that are usually offered by mutual life insurance companies. These policies offer refunds on insurance premiums that exceed a specific level. Keep in mind that premiums for dividend-paying policies are typically higher than those for regular whole life insurance policies.
As one of the types of life insurance policy available, universal life insurance offers more premium payment flexibility and growth in cash value, unlike whole life insurance. Your monthly premium payment will be set based on your cash value and the cost of your death benefit and expenses are deducted. Your cash value is tax-deferred, and you can borrow money or make withdrawals at any time.
Variable Life Insurance
There are two types of life insurance policy when it comes to variable life insurance – variable universal and variable whole. With a variable life insurance policy, your cash values and death benefits will vary depending on the performance of the assets from your premium payments. Some variable life insurance polices will offer a guaranteed minimum death benefit, but it may come at an additional cost. Variable universal life will let you pick the investment for your cash value. This may present an additional risk depending on the type of investment you make. Variable whole life offers the ability of your death benefit and cash value to be based upon the performance of the investment you choose. As with variable universal insurance, you have the potential for greater growth, but it comes with risks.
Knowing which of the types of life insurance policy is important in putting you at ease and your family’s future expense free, should you die unexpectedly.