The main two types of life insurance that you can choose from are permanent life insurance and term life insurance. They both have a few variations that will be covered as well. Anyone seriously looking for a policy should be familiar with these two types of policies and the coverage they provide.
Term life insurance is very easy to understand. When you opt for this type of coverage you are paying for a set duration. Within that duration, the beneficiary that you have chosen will receive your policy benefits should you pass away.
There are other variations on term life insurance as well. Let’s say you purchase an annually renewable term life coverage plan, which means that every year you are given the chance to renew or not to renew. The truth is that every year the price of the policy and its premiums can increase, so some consumers will want to avoid this by opting instead for a guaranteed level term life insurance policy.
Depending on how you have set it up, the costs of this type of policy will remain the same for between 5 and 30 years. There is also a new type of term insurance called ROP (Return of Premium) and if you are still living at the end of the term, the value of this policy is paid out to you. Should you die during this period, the funds will go to your beneficiary.
On the other hand, permanent life insurance will cover you throughout your entire life and comes with higher premiums. There are several types of this kind of life insurance.
First, there is what is called “whole life insurance.” This coverage spans your entire life as opposed to only lasting for a set duration. Overall, a whole life policy has heftier costs and premiums than term life insurance, but still the investment potential does appeal to many insurance seekers.
The second type of permanent life insurance is “universal life.” With this type of policy you are able to factor in a preferred amount to the minimum cost of the premium. Insurance companies are then able to invest these funds and the returns are added to your premiums or allowed to accrue over time. In addition, there is another subcategory of this type of policy called universal variable life, which allows customers to select their own investments as opposed to leaving it up to the insurance company.
“Variable life” is a third type of permanent life insurance and this type of policy also gives you additional investment options, including stocks. This type of policy is not unlike the universal coverage which allows investment returns to either go towards premiums or accrue in another account. The beneficiary will be entitled to the value of the policy, as well as to a portion of, or maybe even the entire cash amount of, the investment returns.
Be sure to speak with a trusted life insurance agent if you have further questions, and/or use the Internet to conduct life insurance policy research online.
Photo Credit: dhilowitz