Having life insurance is essential in nearly any good, solid financial plan. This important tool can provide the funds that are required for a variety of different needs, such as the payoff of a mortgage, the replacement of a breadwinner’s income, a child’s future college education costs, and the decedent’s final expenses.
Anyone who has people that they care about – especially if those individuals are depending on them for any type of financial support – must consider owning life insurance. Otherwise, if the unexpected should occur, the lifestyle of their loved ones may need to change substantially.
Types of Life Insurance Policies
Today, there are two primary types of life insurance policies that are available in the marketplace. These are term and permanent – and within each of these categories, there are a number of different versions and additional policy features. Because of this, life insurance plans can be created to fit nearly any type of need.
Permanent Life Insurance
Permanent life insurance is the type of life insurance that can be purchased and kept throughout the remainder of an individual’s lifetime. With permanent life insurance, policies include both a death benefit feature, as well as a cash value component where the policy holder can build up savings or investment funds – all on a tax deferred basis – over time.
Within the permanent life insurance category, there are numerous different policy structures, the most basic of which is whole life insurance. Whole life insurance policies offer life insurance protection for the “whole of one’s life” – provided that the premiums continue to be paid and the policy is not cancelled.
With whole life insurance, the premiums remain fixed throughout the life of the policy. Therefore, the policy holder does not have to worry about the premium increasing with his or her advancing age or due to the attaining of an adverse health condition in the future.
These plans also offer a guaranteed amount of death benefit, and along with that, they also provide a cash value feature. This cash value is usually guaranteed to increase each year by a certain amount of interest.
Throughout the earlier years of a whole life insurance policy, the premiums will usually be much higher than those of a comparable amount of term life insurance coverage. This is because a portion of the premium is going into the cash value. However, over time, the cash in the whole life plan can be borrowed or withdrawn for any need that the policy holder sees fit.
Another type of permanent life insurance is universal life. These policies also offer a guaranteed amount of death benefit, as well as a cash value. However, universal life is considered to be more flexible than whole life insurance because the policy holder is able to change – within limits – the death benefit, as well as the timing and the amount of their premium.
It is important to note, though, that if the policy holder opts to pay a lower premium within a certain time period, the cash value will not grow as fast. Even so, the guaranteed amount of life insurance coverage will still stay the same.
There is also another type of permanent life insurance coverage – variable life. With variable life insurance, the insured will have permanent death benefit protection, along with a separate account component that contains investment vehicles such as stocks and mutual funds.
By allowing the policy’s funds to participate in the ups and downs of the market, the investment component of a variable life insurance policy is considered to be much riskier than a whole life or a universal life insurance policy. This is because the policy holder runs the risk of losing his or her funds. However, there is also the opportunity for funds to grow more as well.
Term Life Insurance
Term life insurance is considered to be the most basic type of life insurance that a person can have. This is because term life only includes death benefit protection, without any type of cash value or savings component. Because of this, term life is comparatively cheaper than permanent life insurance coverage.
Term insurance policies are sold for certain lengths of time – or “terms.” These are typically anywhere from just one year up to 30 years, depending on your age at application. Once your policy has expired, you will need to re-apply for coverage at your then-current age and health condition.
Oftentimes, term life insurance is thought to be an ideal type of coverage for those who are looking for affordable life insurance protection. It is also a great way to cover “temporary” coverage needs such as the payoff of a home mortgage.
Which Type of Life Insurance is Best For You?
When deciding which type of life insurance to choose, it is important to take into consideration the needs that you are covering, as well as the amount of coverage that you will need. It is also a good idea to compare the types of life insurance policies – as well as the premiums – that are available to you. When doing so, we can help.
We work with many of the best life insurance companies in the industry today – and we can help you in comparing life insurance policy coverage, as well as in comparing life insurance premium quotes. You can do so quickly and easily from your home computer. All you need to do in order to get the process started is Click Here.
If you have any questions at all when considering which policy may work best for you, please feel free to contact us. Our experts can walk you through the difference between permanent and term insurance, why one may work better than another, and discuss which may be the better option in your particular situation. You can contact us directly, toll-free, at 864-491-5785. We want to ensure that you purchase the right amount and the right type of life insurance protection for those whom you love.