Types of Life Insurance Policies

Trying to differentiate the various forms of life insurance policies can sometimes be a daunting activity and could lead to confusion and frustration. However, in this article, I’ll briefly explain the different kinds of life insurance policies to give you a better understand so you can easily tell the difference whenever you want to get a life insurance.

Term Life

Term Life insurance policy is regarded as the most common and basic life insurance coverage and is also known as a short-term life insurance. As the name implies, it runs over a stipulated period or length of time. The premium paid for this policy is the cheapest among all other insurance policies, and it has no cash value account. You are allowed to select a term life policy for a guaranteed number of years, typically 10, 15, 20, 25, or 30 years. The principal objective of term life insurance is to indemnify whoever you have selected as benefactor upon your dismissal. However, you should note that the benefactor will not receive any indemnity if you are still alive at the end of the stipulated time. We have the increasing and decreasing term life insurance coverage. While the death benefit increases over time in the increasing term life insurance policy, the death benefit decreases in the decreasing term life insurance policy, with the premium remaining constant.

Permanent Life

These types of life insurance policies have no stipulated time limit, and they last till the end of the holder’s lifespan as long as the premium is regularly paid. Unlike the term life insurance policies, permanent life insurance has no time limit, and it offers both death benefit and cash value account. There are two distinct forms of permanent life insurance coverage – the whole life insurance policy and the universal life insurance policy.

Whole Life

Whole life insurance policy is the simplest form of permanent life insurance coverage. It is immune to factors that would result in an increase in the premium of the insurance policy – sticking to a fixed budget for premium. This is because the premium remains fixed throughout the contract regardless of any form of advancement in age, status or critical health circumstances. Its benefits include guaranteed protection for family and building a guaranteed cash value annually, which could be borrowed for personal use and unforeseen issues.

Universal Life

This policy is another form of permanent life insurance coverage. Universal life insurance policy is more flexible than Whole life insurance, and both the mortality and expense costs are transferred directly to the policyholder. Within certain guidelines, the policyholder can dictate how much of his premium should be given to the policy’s death benefit and the amount that should be credited to the policy’s cash value account. As a form of permanent life insurance policy, you have the right to access your cash value account, and money can be withdrawn for personal reasons such as the settlement of debts, vacation trips, emergency issues, etc.

Variable Life

This type of life insurance policy allows the policyholder to invest the cash value in various areas such as the equities market. It could be beneficial if spent wisely and the investment yields profit, but if the investment fails, it will lead to a decrease in the cash value as a result of unexpected losses.

Variable Universal Life

This policy is similar to the regular universal life insurance policy. However, in this policy, the holder has the right to invest the cash value in various investments such as mutual funds.

Survivorship Life

These policies cover more than one individual, and they can be setup in different ways – first to die or last to die. In the first to die policy, the value will be paid to the surviving partner when the first person departs. While in the last to die policy, the value is paid when the second person departs. Survivorship life insurance can be term or permanent life insurance policy and the premium for this policy is usually on the high side. Part of the benefits includes less underwriting criteria – if one of the partners is in good health – and it will cost less than two separate life insurance coverage.

No Medical Exam Life

Many insurance policies require individuals to go for one form of medical test or the other before insurance will be granted, and in some cases, the results from these tests can lead to the denial of the insurance policy. However, No Medical Exam Life insurance policy does not require you to undergo any form of medical examination as part of the underwriting criteria – which means such policies could be approved within a day or two.

With whatever insurance coverage you decide to take, it is important to find out if discounts are available so you could save a few bucks, so it is advisable to get multiple quotes from different companies. It will help in negotiating and comparing different quotes.

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