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Life insurance can be hard to understand. There are several types of life insurance, each with its own features, benefits, and purposes. Here are the main types of life insurance:
- Term Life Insurance: Term life insurance provides coverage for a specific period, usually ranging from 5 to 30 years. If the insured person passes away during the term, the policy pays out a death benefit to the beneficiaries. Term life insurance is generally more affordable and straightforward than other types. It’s suitable for providing temporary coverage, such as paying off debts or supporting dependents until they become financially independent.
- Whole Life Insurance: Whole life insurance is a type of permanent life insurance that provides coverage for the entire lifetime of the insured person, as long as premiums are paid. It includes a savings component known as cash value, which grows over time and can be accessed or borrowed against. Premiums for whole life insurance are typically higher than those for term life insurance due to the cash value component.
- Universal Life Insurance: Universal life insurance is another type of permanent life insurance that offers more flexibility than whole life insurance. It allows policyholders to adjust the premium payments and death benefit within certain limits. The policy’s cash value can earn interest based on prevailing market rates or a minimum guaranteed rate.
- Variable Life Insurance: Variable life insurance combines a death benefit with an investment component. Policyholders can allocate their premiums among different investment options, such as stocks, bonds, and mutual funds. The cash value and death benefit can vary based on the performance of these investments.
- Variable Universal Life Insurance: This type combines the flexibility of universal life insurance with the investment options of variable life insurance. Policyholders can adjust premiums, death benefits, and investment allocations. However, the investment aspect also introduces risks, as the policy’s performance is tied to the market.
- Indexed Universal Life Insurance: Similar to universal life insurance, indexed universal life insurance allows policyholders to adjust premium payments and death benefits. The cash value is linked to a stock market index, allowing it to potentially earn more interest than traditional universal life policies.
- Survivorship Life Insurance: Also known as second-to-die insurance, survivorship life insurance covers two people, usually spouses, under a single policy. The death benefit is paid out after the passing of the second insured individual. This type of policy is often used for estate planning and to provide funds for estate taxes.
- Guaranteed Issue Life Insurance: This type of policy is designed for individuals who might have difficulty obtaining coverage due to health issues. It typically has no medical exam or health questions, but the coverage amounts are usually limited and premiums tend to be higher.
The right type of life insurance depends on your individual financial goals, budget, and circumstances. Before deciding on a policy, it’s advisable to consult with an insurance professional to ensure that you’re choosing the type and amount of coverage that aligns with your needs. We have a life insurance specialist that can help get you started. Call today and ask to speak to someone regarding life insurance, at 330-867-3140!