Types of Life Insurance

Life insurance will typically come in two primary categories, although each category will contain numerous subsections. The main two categories are term life insurance and permanent life insurance. In order to determine which specific life insurance policy is most suited to your individual circumstances, it is advisable that you speak with a professional life insurance consultant.

Term Life Insurance
This type of life insurance will typically only ever pay a death benefit. As the name suggests, this death benefit will only be paid if the beneficiary of the insurance policy dies within a specified period or term. There are various forms of term life insurance and these include:

Level term life insurance - this will provide you with a fixed amount of coverage, and your premiums will generally be fixed as well. You will need to choose a specific period of time for which you would like coverage, and should you unfortunately die within this time period you will receive an exact amount of insurance, as specified in your original policy.

Increasing/decreasing term life insurance
- this will typically mean that the amount of coverage you have will either increase or decrease throughout the term of the policy. However, your premiums will usually remain at the same level.

Renewable term life insurance
- this type of life insurance policy will allow the beneficiary/policyholder to renew their insurance coverage once their original policy has ceased. With a renewable term policy you will not be required to submit any further evidence of insurability.

Convertible term life insurance - this allows you, as the policyholder, to convert from a term insurance policy to a permanent insurance policy.

Group term life insurance - this is generally the type of life insurance policy that is offered by a professional association or an employer. This form of life insurance will usually cover several people, which will often result in far lower premiums.

Permanent Life Insurance
This will provide life insurance to the beneficiary throughout their entire lifetime, and will often include an element that will build up a cash value.

Indexed universal life insurance - this type of life insurance policy will allow your plan’s cash value to follow the performance of a financial index. However, if the financial index becomes negative, your policy will still hold some cash value.

Traditional whole life insurance - this type of life insurance policy will remain in force throughout your entire lifetime. This, once again, will typically provide a cash value that will accumulate over time.

Universal life insurance - a universal life insurance policy will generally have a flexible premiums and even a flexible face value.

Variable life insurance - this is where the actual death benefit and cash value of your policy will fluctuate in accordance with your investment options. Should your investment perform well, this will provide a higher cash value and death benefit and vice versa. However, with that said, the vast majority of variable life insurance policies will provide a guarantee that your death benefit will not fall below a predetermined amount.

Variable universal life insurance - this type of life insurance policy will combine the greatest benefits of a universal life insurance plan and a variable life insurance plan. This type of policy is often referred to as either a flexible premium variable life insurance or universal life insurance II.

Last survivor universal life insurance - this type of life insurance policy is often referred to as "second to die" life insurance. This is a permanent life insurance policy that will cover two people, but will only pay out the proceeds when both parties have died. This life insurance policy is specifically designed to deal with estate taxes.

Single premium whole life insurance - all other life insurance policies will typically require you to pay either an annual or monthly premium. However, with a single premium whole life insurance you will simply pay a single, lump-sum premium. This may be especially beneficial for someone who has a large sum of disposable cash early in their life.

One of the more difficult decisions you may face is the actual amount of life insurance you should have. The most common factor in deciding this should be based on replacing your income. It is believed that an amount that is equal to 5 - 10 times your annual salary is sufficient. However, this may not always be possible due to your current financial circumstances, and therefore you should purchase life insurance based on your own individual preferences and needs. Life insurance is, without doubt, one of the most important forms of protection that you will ever need. This is a way for you to provide your spouse, or surviving family members, with some peace of mind at an extremely difficult time in their lives. The last thing that anyone wishes to think about when somebody close to them has died is how they are going to pay the bills or support their basic living costs.

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