With so many different types of life insurance, you may be confused about which one would be the best bet for you. We’re here to help you pick the right life insurance policy.
Listed below are the different types of life insurance you should know about:
Term Life Insurance
This insurance policy lasts for many years before it expires. If you die before the term is up, a death benefit (a fixed amount of money) is paid to your beneficiary. A term insurance policy is the most accessible and simplest life insurance policy.
When you pay your premiums, you’re paying towards the death benefit that goes to your beneficiaries when you’re no more. The death benefit can be paid as an annuity, a lump sum, or a monthly payment. Most people choose the lump sum option for the payment of the death benefit.
Term life insurances generally have lower premiums and are more affordable than other types of life insurance policies.
Whole Life Insurance
Since whole life insurance does not expire, it is a permanent type of insurance. It has a cash value and a death benefit, which is a tax-deferred, investment-like savings account that comes as a part of the policy.
The cash value accrues interest at a fixed predetermined rate. Every month, a certain amount from your premium goes into the cash value of the policy and offers a guaranteed return rate. This cash value grows with time, and it can be withdrawn when there’s enough or used for a loan.
Whole life insurance offers to cover you as long as you pay your premiums.
If you need the cash value for long-term dependents like children with disabilities, or to cover estate plans, endowments, or other such things, whole life insurance may be a better option.
Universal Life Insurance
Just like a whole life insurance policy, universal life insurance also offers a cash value. Your premiums go towards both the death benefit and cash value. However, you can change the death benefit and premium amounts without getting a new insurance policy.
Even though you need to pay a minimum premium amount to keep the policy, the premium can also be paid using the cash value. If you have enough money in the cash value, you can use that money to skip your premium payments. The accrued interest can do the work for you until the cash value has been depleted.
Some other types of life insurance policies are as follows:
– Variable life insurance
– Indexed universal life insurance
– Group life insurance
– Variable universal life insurance
– Final expense insurance