Life insurance is an essential part of the financial portfolio of responsible adults who want to protect the interests of their loved ones in case something happens to them. With all the types of life insurance policies available, investing time to educate yourself about them is vital to making the right decision for you and your family. But this will take hours, not weeks, and the return on your time investment will be huge. All you need is a place to get comprehensive insurance information, and that is exactly what this site is.
Term life insurance is the cheapest and simplest form of insurance. The insured person pays premiums to be covered over a defined term, and if he/she passes away, the beneficiaries named on the policy get a ‘death benefit’ paid to them. There are several types of term life:
**Level term promises a coverage amount that doesn’t change over the life of the policy, with fixed premiums over a defined time period.
**With decreasing term, policy premiums usually don’t change, but the amount for which the policy holder is covered is reduced over the term of the policy, until the end of the policy term, at which time the payout is zero.
**A renewable term policy can be renewed at the end of the original term. If you purchase term life insurance, you should seriously consider renewable term, or you might find yourself with nothing to show for years of premium payments. Worse, it may be very difficult or impossible to find affordable life insurance when you are in your 50s or 60s.
**With convertible term you may convert the policy to permanent policy before the end of the term, which also circumvents the problem of being suddenly with no insurance in your later years.
**Group term is normally offered as part of a package by employers to their employees. The employer most likely can negotiate reduced rates, and employees are saved the hassle and expense of maintaining their policies.
As you might expect, there certainly are types of life insurance policies that provide coverage for your entire life. Permanent life insurance has a number of subtypes as well, but first, a definition: this insurance has a guaranteed payout, usually payable upon the death of the policyholder. This makes it more expensive than term. It is most accurately thought of as an investment as well as life insurance, because all of its subtypes use the ‘cash value’ of the policy as a provision for overall financial security of the policyholder, not just life insurance. For premiums that are usually higher than those of term, you are buying flexibility with permanent life, but there are varying degrees of risk involved in many of these policies, as well. Policies like variable life or variable universal require a level of financial sophistication not required by a term life policy. The following are the main types of life insurance policy that fall under the permanent insurance umbrella:
**Whole life promises the assurance of a payout, as long as (usually fixed) premiums are maintained as per the policy. Usually has a cash value amount which is designed to cover the eventual policy payout. Interest is paid on this cash value. Usually much more expensive than term life.
**Universal life insurance differs from whole life mainly in that the death benefit may be adjusted depending on the needs of the policyholder, and that the premium payment may vary depending on changes in the cash value amount. As with WL, the policy cash value increases by accruing interest. Benefits of UL over WL may include provisions to take out no-interest loans on your universal life cash value amount. Also, with this policy you know just what you are paying in miscellaneous charges, which is rarely the case with whole life.
**Variable life insurance differs from whole life insurance in that the policy’s death benefit and cash value vary based on the performance of accounts into which part of your premium payment may be routed. These accounts hold investments like stocks, bonds, money market funds, etc. and as the policy is more aggressive in its pursuit of investment gains, it involves more risk than universal life.
**Variable universal life insurance, as you might expect, gives you the premium payment and payout flexibility of universal life insurance and the investment flexibility (and risk) of variable life insurance. Assuming the investments tied to the policy perform well, the payout may be more than the guaranteed face value amount.
**Last survivor universal life, aka survivorship/second-to-die life insurance, is often designed to cover estate taxes, as it pays out when both of the policyholders have passed away.
**If you are in a position to pay for your life insurance with one large payment, you have single-premium whole life insurance as an option.
One article can’t be a totally comprehensive look at all the different types of life insurance, but thumbnail sketches of most of them might provide a good starting point for further research.