A Beginner’s Guide to the Different Types of Life Insurance


The best life insurance policy for you will depend on your financial situation and the reasons behind obtaining such a policy. In order to figure out the best life policy, you can first assess your finances with the help of an insurance agent.

Here are some of the main types of life insurance and the reasons behind obtaining them:

Term life insurance

Term life insurance is a type of life insurance that is not permanent and lasts only for a number of years before it expires. It may seem complicating at first but it is actually the simplest and most accessible life insurance policy.

If you die within this particular term, then the proceeds known as the ‘death benefit’ will go to your beneficiary. It can be received by the beneficiary as a lump sum or as a monthly payment. You can compare life insurance policies of this type offered by various companies before making your decision.

Whole life insurance

This is a type of permanent life insurance because it does not expire. This includes a death benefit and a cash value as well. The cash value grows over time and can be withdrawn when it accumulates. Whole life insurance is more expensive than term life insurance.

This type of life insurance policy provides lifetime coverage as long as the premiums are paid. This is an insurance you should be looking in to if you need the cash value for endowments or if you have long-term dependents.

Universal life insurance

Universal life insurance, just like the whole life insurance provides a death benefit and a cash value for premium payments. However, the difference is that the premium and death benefit amounts could be changed without having to obtain a new policy. If you accumulate enough cash value, it can be used to pay the premium as well. However, the downside is that the cash value of the universal life policy is sensitive to current market interest rates.

Variable life insurance

The cash value of a variable life insurance policy goes in to a series of sub accounts which leans more towards an investment opportunity. However, the variable life insurance policy is more of a riskier option as there are many variables that need to be considered. This type of life insurance provides both a limited investment option and limited coverage as well.

Final expense insurance

Final expense insurance is a policy you could consider if the other types of policies are not what you are looking for. This life insurance policy is a unique type of police that covers all costs related to your death such as medical expenses, funeral costs or cremation expenses. This is an attractive option for older people. However, the premium cost is higher for a lower coverage amount so, if possible, it is better to look at other avenues to pay for funeral costs. There are 2 types of final expense insurance known as simplified issue and guaranteed issue.

With these introductions for each type of life insurance, you will be able to easily identify which option is best for you. If you need extra advice on this, you could hire an insurance agent to guide you on the right path.

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