What are the Types of Life Insurance and Which is Right for Me?
Are you looking into getting a life insurance plan?
Applying for life insurance is a great and essential long-term investment. If you’re the breadwinner of the family, insurance can provide financial support in case of an accident. However, studies show that over 28.9 million Americans remain uninsured.
One of the main reasons why people put off getting insurance is because coverage costs are too high. If you’ve been hesitant about getting insurance because of costs, this is the article for you.
What are the types of life insurance? We have everything you need to know. Read on to discover more about your options and choose the right plan.
Term Life Insurance
Going through various insurance options can be overwhelming if you don’t know what to look for. If you’re hoping to get insurance, start with simpler plans.
Term Life insurance is the simplest and cheapest insurance available to you. If you have loved ones who rely on you for financial support, this is the best insurance. Term Life insurance allows you to choose your beneficiaries.
Your beneficiaries will receive a fixed amount of money after your death. This allows you to care for your family’s financial needs even after you’re gone. Beneficiaries can use this money to pay for funeral costs or cover outstanding debts.
You need to set a specific term or payment period to get this type of insurance. Your term can last between 15-20 years and may end when you reach a certain age. If you get a 20-year term, you’ll need to make monthly payments for 20 years.
The only disadvantage of Term Life insurance is that it does not provide cash value or savings. This type of insurance will only cover the terms you choose. You won’t get any of your deposits back if you outlive your term.
Permanent Life Insurance
Permanent Life insurance can come in three forms. These are Whole Life, Universal Life, and Variable Universal Life. We’ll expound more on this later.
Permanent Life insurance provides owners with two benefits. This type of insurance offers a death benefit and serves as an investment account. Permanent Life insurance functions on a cash value basis.
Cash value is similar to a savings account and allows you to deposit monthly money. Over time, you can build up a cash value to pay for or borrow against the policy.
Whole Life Insurance
Whole Life insurance may be the better choice if you want lifelong coverage. Whole Life insurance will be with you for the rest of your life if you stick to the agreement and pay your dues.
You get a death benefit and savings account like Permanent Life insurance. The only difference is that you get more cash value the longer you own the policy.
Take note that Whole Life policies require you to pay premiums throughout your life. Other policies may require premiums for a short period.
It’s crucial to note that many factors result in a satisfactory outcome. Owners will need to consider the policy design, service, and setup. However, if this isn’t an issue for you, you can expect the following guarantees.
- The death benefit will last your whole life.
- A guaranteed return rate on cash, and
- A fixed premium cost that will not change when you purchase
Whole Life insurance is the best choice if you’re looking for guarantees. If you pay the required premiums, you don’t only get the death benefit. Many Whole Life insurance providers offer a safe and stable savings plan.
Universal Life Policy
Universal Life is another variant of Permanent Life Insurance. However, unlike Whole Life, policy owners can get adjustable premiums. A Universal Life policy allows you to adjust your yearly payments by accessing a cash value.
This is a better alternative to Whole Life insurance if you have a tighter income. Universal Life policy owners will still need to pay a minimum premium fee. Its main benefit is that you can cut down some of your premium payments using whatever cash value you have.
Your provider will halve your premium fees between your death benefit and savings. Your investment will grow over time, but renewal fees can be hefty. This annual renewal fee may cover your death benefit but will not go to your savings.
Despite this, Universal Life insurance remains one of the most flexible policies. This insurance starts as inexpensive and will increase costs as you get older. Universal Life insurance can be a great option with the proper policy design and implementation.
Variable Universal Life Policy
From the name itself, this form of insurance comes with more variables. Aside from the death benefit and savings, this insurance policy also offers a mutual fund. Policy owners get to decide how they invest their cash value.
This is the best insurance choice for you if you want full control over your insurance. However, it’s crucial to note that all risks will fall on you, not the insurance company. Variable Universal Life policies do not guarantee how much cash value you get.
Joint Life Insurance
If you want to share an insurance plan with your partner, a Joint Life policy is what you need. This policy will cover you and your spouse. When one spouse dies, the remaining party will receive the death benefit.
What Are the Types of Life Insurance?
Are you wondering what are the types of life insurance? Not sure how to pick the right life insurance? Now you know!
Knowing your life insurance options will give you a better idea of what suits your needs. You can set yourself and your family up for a more secure life with the right choice. Insurance can replace your income in case of sudden death.
Beneficiaries can use this money to pay off funeral costs or debts. However, if you want to ensure your family makes good use of your death benefit, don’t stop here! Check out our other guides for tips on handling your loans.