The life insurance policies offered by most insurance companies today have become very complex and it can be difficult to understand them. This is why it is important to understand the different types of life insurance available before you make a decision on which type is right for you. The following is a brief explanation of the most common types of life insurance policies available in the United States:
Whole Life Insurance: This is probably the most traditional form of life insurance. In whole life insurance the insurer pays a death benefit that is equal to the premiums that have been accumulated. As long as the premium payments are made on time, the policy holder will receive all the death benefits. Whole life insurance provides cash value, unlike term insurance policies, so if the premium never amounts to a predetermined amount, the beneficiary will still receive the death benefit.
Term Insurance: This is another common type of life insurance coverage. Term insurance provides coverage for an agreed period of time, usually from one year to thirty years. The insured pays premiums every term, and at the end of the term the insured individual is left with an amount that is slightly less than the value of the premiums.
Carefully consider the type of coverage you want, especially if your family consists of individuals who are young and healthy. Whole life coverage is perfect for young working families with children. If you do not have any dependents, term life insurance coverage is a good choice. Because of this, term life insurance provides coverage to your dependents when you pass away but does not provide coverage beyond the term.
Universal Life Policies: An increasing number of people are choosing to purchase universal life insurance policies. A universal life policy allows the owner to build a cash value that accumulates through dividends. Premiums are based on the growth rate of the cash value. Although there are no premiums or death benefits, the cash value of the policy can be withdrawn by making premium payments.
As with whole life insurance policies, cash value is credited throughout the policy term. The difference between the value of the premium and the value of the cash grows each term. Some policies allow up to four variable rate investments within the cash value. These investments include CDs or liquidating stocks and bonds. Although the premiums paid on these types of policies are significantly higher than those on whole life policies, they allow the owner to access their money for their needs as they begin to age.
Level Term Life Insurance Policies: Most whole and term life insurance policies have two parts: the death benefit and the accumulated benefit. Both of these parts accrue interest. Once the term has expired, however, the policy will cease to exist. In contrast, level term life insurance policies offer a fixed premium for both the death benefit and the accumulated benefit throughout the life of the policy.
As you can see from this overview, there are many types of life insurance products to choose from. Many factors must be considered when purchasing any type of life insurance policy. It is important to talk with a qualified life insurance agent to determine the best coverage and price for you. You may be able to learn more about term policies from an agent who specializes in them. Most agents will be happy to give you a free quote for term life insurance products and help you make the best decision.
Term Whole Life Insurance: Whole life insurance policies provide lifelong coverage with a variable premium. This option can be an attractive option for younger people who may not yet qualify for a whole life insurance policy. Term whole life insurance policies provide the most value for the least cost to the consumer. This option can provide lifetime coverage at a lower premium than some other options. This is a good choice for those looking for life insurance that will provide a steady income over the long term.
Universal Life Insurance: A more common type of life insurance term policy is the universal life insurance term. Universal life insurance policies will cover the death benefits and invest the account for you, providing you with a steady income in place of a lump sum payment during your lifetime. These types of policies are usually set up to allow you to build cash value with tax deferred investments. There is usually no guarantee when it comes to this type of life insurance term.
Universal Life Insurance: The universal life insurance provides you with a combination of the above two options to provide lifelong coverage. The cash value of the account is invested by the company and paid out as a death benefit when you die. You may also choose to withdraw money from the cash value account to use as you see fit. This policy does not provide any kind of guaranteed cash value.