Different Types Of Life Insurance

If you are considering taking out a life insurance policy of your own, then you surely must be aware that there are so many different types of life insurance policies in the market today. Thus, you should also take time to familiarize yourself with these different types, so that you can be sure to make a more informed decision in the end.

In its most basic form, a life insurance policy is actually a contract between two agreeing parties: the insured or the policyholder and the insurance company itself. We all know that risk is inevitable in life. By taking out a life insurance policy, you are actually transferring that risk to your life onto the insurance company at the expense of paying premiums over a certain period. In a sense, life insurance actually provides the policyholder some sort of financial cushion, especially for the dependents that the policyholder will leave behind upon his death.

For discussion’s sake, here are the different types of life insurance policies that you should be aware of.

Level Term Insurance

The coverage for this type of life insurance remains level or constant until the period that was originally selected by the policyholder. The time period here can be 10, 15, 20, or 30 years. Once the term has been chosen, this can no longer be changed, so the policyholder should exercise precaution here. Level Term Insurance is ideal for temporary coverage. However, if you want more permanent insurance, these policies can be converted quite easily.

Permanent Life Insurance

From the name alone, this type of policy is more permanent in nature. This means that the payout occurs only at the end of the policy, which is practically the whole life of the policyholder. This is actually the preferred type of insurance by people who have regular and steady income.

Universal/Variable Insurance

This type of policy is similar to a mutual fund in the sense that its cash value builds up. What remains variable here, however, is the premium that is to be paid by the policyholder. This amount can actually vary for every time that it is due. People who have variable income prefer this policy because of the convenience of paying variable premiums.

Whole Life Insurance

This policy involves the payment of a certain lump sum upon the death of the policyholder. There are also cases when the lump sum would be paid upon the diagnosis of a critical or fatal illness. When it comes to long-term outlook or planning, this type of policy is definitely preferred.