Life Insurance is one of the safest and most needed investments we make. As soon as we start reaching adulthood, the first thing we should look forward to, in terms of our investment, has to always be life insurance.
Some of the common types of insurance include term and life insurance. Life insurance has different subcategories such as traditional, natural, universal, variable universal, and universal life. Life insurance products tend to be grouped under various packages which are sold to people.
Today we will be covering the different types of life insurance and how they are different from each other. For the most part and explained on The Insurance Pro Blog there are three different types of life insurance but in this article we will cover a few more.
Term insurance is said to be one of the simplest forms of life insurance. Under this policy, one can place a claim only if the policyholder dies during the term duration. The tenure of the policy is usually between 10 to 30 years. The majority of the term insurance policies don’t have any other provisions.
Some of the primary term life insurance policies include decreasing term insurance. Under the decreasing term, the death benefit decreases and is ideally one-year increments over the policy’s tenure.
Whole Life or Permanent
Under the whole life or permanent insurance, one can get the death benefit no matter whether the policyholder dies or lives for another 100 years. The major types of whole or permanent life insurance include whole traditional life, universal life, and variable universal life. There are also some variations under each.
Under whole traditional life, one can get death benefit and premium benefit. As the person starts aging, the cost per $1000 tends to increase and it gets even higher if the insured lives for 80 years or more. The insurance provider tends to charge a premium which is most likely to increase every year, however, it can be challenging for people to afford the insurance when they get older. This is why the company chooses to keep the premium high in the early years. It is relatively higher than what is needed to be paid.
As per law, when the overpayments reach a certain level, they tend to be paid to the policyholder as per the cash value provided if they choose not to go with the standard plan. The cash value is said to be an alternative but not an extra benefit as per policy.
Whole or Ordinary Life
It is one of the most common permanent life insurance policies and it also offers a death benefit. One needs to pay some specific amount as a premium if they choose to go for this type of life insurance policy and the premium has to be paid regularly.
Universal or Adjustable Life
This type of policy gives the policyholder a lot of flexibility compared to the traditional life insurance policies. If one passes a medical examination, then the benefit value can be increased. The savings account tends to earn a certain amount of interest. Once the money has been accumulated, one can alter their premium payments provided there is plenty of money in the account to align with the costs. Before deciding to pay the premium amount, one should talk to their agent as there are chances one wouldn’t have enough money to pay the regular premiums.
This insurance policy is a combination of death protection and savings account, in which the policyholder can also invest in stocks, mutual funds, and bonds. The value of the policy grows over time however there are a lot of risks involved. The cash value and death value will decrease if your investments don’t perform up to the mark.
Once you decide what kind of policy you are looking for, you should compare it with a couple of other policies before making a final purchase. Look for the benefits you want and choose the policy as per your needs. As mentioned above, this is something that will benefit you and your survivors in the long run.