There are different types of life insurance policies; a number of factors decide the best one for you. These factors may include the amount of premium you can pay, how long you want to keep the policy, what type of coverage you want, among others.
A list of the types of life insurance
1 term life insurance
2 universal life insurance
3 whole life insurance
4 simplified issue life insurance
5 group life insurance
6 variable life insurance
7 guaranteed issue life insurance
Every type of life insurance comes into the following two categories:
1 Permanent life insurance
This policy runs your whole life with a certain cash value, which can be withdrawn or borrowed against until you are breathing.
2 Term Life Insurance
This policy is for a certain number of years. It is suitable for a greater number of people. If you live after the time period of the policy, it is considered to have expired without any payment.
Defining the types of life insurance
1 Term Life Insurance
It is sold in brackets of 1, 5, 10, 15, 20, 25, or 30 years. The amount of coverage may vary according to the policy, but it can reach up to a million dollars (level premiums). It usually has a fixed price for the entire term of the policy. It can be renewed annually, which is handy for people seeking shorter-term coverage.
Pros
- It is considered the cheapest policy.
Cons
- If you buy out the policy, your beneficiaries will not get any payout.
2 Universal Life Insurance
It guarantees the death benefit. The premium remains the same. The cash value is little to none in the policy. The insuring companies will demand the premium payments on time. The selection of age will depend on your age at which you want the guaranteed death benefit.
Pros
- With cheaper or minimal cash payments, it is calculated as being cheaper than whole life insurance.
Cons
- You must not miss the payment due to the insurer, otherwise your policy will be considered ended.
3 Whole Life Insurance
It runs with your breath, with the regular premium payments. Your premiums and death benefit amounts remain the same. Plus, you will receive the guaranteed rate of return on the whole life insurance policy’s cash value.
Pros
- It provides cover for your whole life and adds cash value.
Cons
- It is more expensive than other policies like term life insurance, etc.
4 Simplified Issue Life Insurance
It is underwritten life insurance. It does not bind you to take the medical exam. But it will require you to answer certain health related questions. Your approval of the policy will rest on that basis.
5 Group Life Insurance
The employer offers it as a component of the company’s benefits. The premiums will depend on the group collectively rather than individually. Employers offer some basics for free, with add ons to be purchased by the employee called “Supplement Life Insurance.”
6 Variable Life Insurance
Its cash value is related to the investment account, for example, mutual funds or bonds. The death benefit and premiums are fixed for variable life insurance.
Pros
- If your investments perform well, they can provide huge gains.
Cons
- As the cash value fluctuates daily, you need to manage the policy very carefully.
7 Guaranteed Issue Life Insurance
This does not require any medical exam or health-related questionnaire to get the policy until you are within the eligible age limit of 40–85 yrs. But this policy is expensive, and the coverage cash value is low as well.