Understanding the Types of Life Insurance
Did you know that 60% of adults have life insurance? Three out of five adults have an individual life insurance policy, coverage from work, or both.
There are different life insurance policies, and you need to go through your options to find what’s best for you and your family if something were to happen. Keep reading, and we will walk you through types of life insurance and how to choose between the many options.
Reasons to Consider Life Insurance
People get life insurance for a few reasons. The top reasons include:
- To make sure their final expenses and burial costs are covered
- To leave remaining funds or an inheritance to beneficiaries
- To cover financial loss and replace the income of the person that brings in the most gain in a household
People get life insurance to protect their families. They want to make sure that if something happens to them, their family is still financially supported.
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Types of Life Insurance
There are two main types of life insurance with subsets of each — term and permanent life insurance.
Both term and permanent life insurance policies have other types within them. Term includes simplified, guaranteed, and group life insurance.
Permanent includes whole, universal, variable, simplified, guaranteed, and group life insurance.
The main difference between term vs. whole life insurance is that term only lasts for a certain amount of years, and permanent will last until you die as long as you continue to pay the premiums.
Here are more details:
Term life insurance is sold for a certain number of years. It can be sold in 1, 5, 10, 15, 20, 25, or 30 years. Level premium will keep the price you pay yearly the same for the number of years your policy lasts.
You can also do an annually renewable policy. Term is the cheapest option for life insurance coverage, but if you outlive your policy, your beneficiaries will not receive anything.
Whole life insurance will last until you pass away, but you have to pay the premium on it. It will cover your life and continues to build in value.
However, it can be more expensive than term and other permanent policies.
- Guaranteed Universal
Guaranteed universal life insurance lets you choose the age you want your death benefit guaranteed. You could choose 90, 95, 100, whatever age you think makes sense.
There’s little cash value within the policy, and they are very strict about on-time payments. If you miss a payment, you could walk away with nothing.
Variable life insurance is when your coverage is tied to your investment accounts, such as bonds or mutual funds. The tricky part is it can change daily with the market and will need to be managed constantly.
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Get Life Insurance Today
Now that you know the types of life insurance, you can consult with your partner or a financial advisor on which type is best for you and your family.
Try to think about the future and what will help your family most if something were to happen.
Start looking into different policy options and pricing, or read about the latest in finance here!