Understanding The Major Types Of Life Insurance Plans
If others are depending on you as a breadwinner, it only makes sense to have life insurance to protect your family. But shopping for a policy can be a complicated process. Several different types of life insurance are available, which means you have a variety of options from which to choose. Our experienced agent can help you find a life insurance policy that suits your needs at the best available rates.
What Are The Major Types Of Life Insurance?
The two major types of life insurance are term and whole life (sometimes referred to as permanent life insurance). However, each of these two main categories has its own subcategories.
Term Life Insurance
As the name implies, a term life insurance policy only pays out death benefits if the insured dies within the term of the policy. Depending on the specific policy, the term could run anywhere from one year to 30 years. These are the simplest, most affordable types of life insurance policies. The cost can run as low as $30 to $40 a month for a healthy person in his 20s or 30s for a half a million-dollar policy. The two basic types of term life insurance are:
Level term: With this type of term life insurance, the death benefit remains the same throughout the policy’s duration. Most term life insurance policies purchased are level term.
Decreasing term: The death benefit decreases, typically in one-year increments, throughout the term of the policy.
Whole Life Insurance
Whole life insurance is also called permanent life insurance because the policy does not expire past a specific date, as term life insurance does. Provided you make your premium payments, benefits will be paid out after your death, no matter how long you live. In addition to death benefits, whole life insurance provides cash value – tax-deferred savings included in the policy that accrues interest at a fixed rate and grows over time. However, the cost of whole life insurance can be significantly higher than the cost of term life insurance for the same amount in death benefits.
There are four different principal subcategories within the whole life category:
Traditional whole life: Premiums and death benefit remain level throughout the duration of the policy.
Universal life: Also known as adjustable life insurance, this type of policy provides greater flexibility than traditional whole life insurance. You may be able to increase the death benefit or alter your monthly premium payments. Cash value typically accrues interest at a money market rate.
Variable life: A variable life insurance policy provides death benefits along with savings you can invest in money market mutual funds, stocks, or bonds. Although there is a higher risk involved, there is also the potential of quickly growing the cash value of your policy.
Variable universal life: This type of policy gives you the investment options of variable life insurance along with the flexibility in death benefits or premiums of universal life insurance.
The best type of life insurance for you can depend on several different factors, including your age, health, income, and financial goals. Our friendly agent will be happy to help you shop for the right life insurance policy.