Are you looking to get life insurance?
Studies show that only 54% of people in the US have some type of life insurance. Unfortunately, for some families and individuals, it’s too expensive, but this isn’t true. Some also make the mistake of thinking they don’t need it because they’re young and healthy.
However, regardless of your health or financial status, life insurance is a must. It serves as your safety net during hard times and helps you get by. One way to prepare for the future is to get life insurance.
It gives coverage for uncertainties, serves as an investment, and more. There are many types of life insurance, so which one is right for you? Read on to find out more.
1. Term Life Insurance
As the name suggests, a term life insurance policy provides coverage for a specific time. This policy usually lasts between 10 to 30 years. Compared to permanent life insurance policies, this is more affordable.
During the entire term, you can lock in your interest to make planning and budgeting easy.
Other people call this policy pure life insurance because it doesn’t have cash value. Its sole purpose is to give your beneficiaries a payout after passing away. As long as it did not pass its expiry date and you paid the premiums, a loved one can claim the payout.
After the term, you can renew the policy at an adjusted rate. However, the renewal of a term policy follows a year-to-year basis. Your provider adjusts your policy rate based on your age and health.
If you want a permanent policy, change the coverage to whole life insurance. However, note that not all insurance companies allow it.
2. Whole Life Insurance
If you need a policy that covers the duration of your life, whole-life insurance is the best choice. As it’s a permanent policy, this offers a cash-value component. Using a part of your premium payment, you have an account that builds cash value with interest.
Unlike other permanent insurance policies, whole-life coverage has its defining characteristics. Apart from the growing cash value, its level premium stays the same for life. Further, you can guarantee its death benefit as long as you pay the premiums.
For your cash value account, its sum grows on a tax-deferred basis. So, you pay little to no taxes for the earnings.
3. Universal Life Insurance
Are you looking for a more flexible policy?
With universal life insurance, you can change the death benefits. Apart from the benefits, you can decide whether to increase or decrease your periodic payments.
If you compare whole-life and universal insurance, some characteristics set them apart. Like any other permanent policy, both offer a cash value component. However, universal coverage follows a floating interest rate and results in zero-cost insurance.
The universal policy is best if you want a policy that can adjust to the life situations you face. If you need to reduce payments because you’re in-between jobs, this type of life insurance allows that. You can compare insurance quotes here.
4. Variable Life Insurance
The concept of the risk-return trade-off applies to investments. It states that the higher the risk you take, the higher the return you make. For life insurance policies, variable coverage follows the same notion.
Variable life insurance offers a fixed death benefit that your beneficiaries can claim. However, its cash value is different from the others. Your provider deposits your cash value contribution in mutual fund-like sub-accounts.
In variable life insurance, you can invest using your cash value earnings. Depending on the market, you can grow or lose your money. Note that you can only invest in available sub-accounts in your policy.
If you like to take risks, variable life insurance is a way to start investing.
5. Group Life Insurance
Does your company offer or apply for life insurance on your behalf? Although optional, many companies provide life insurance as an inclusion in employee benefits. This is the group life insurance policy.
Group coverage is different from what you get for yourself. The premium payment is more affordable as the company buys in bulk. Further, most group life insurance offers term coverage.
Some organizations allow their employees to renew or change to permanent policies. However, as a voluntary benefit. As an employee, you pay for the coverage you want and use a part of your salary to pay the premiums.
Although limited, group life insurance is an effective way to build your financial security.
6. Final Expense Life Insurance
This coverage offers clients a smaller and more affordable death benefit. Like its name, the final expense insurance covers one’s end-of-life costs.
This type of permanent insurance doesn’t offer cash value or investment components. It’s a life-long policy as it continues to take effect as long as you keep paying for the premiums. In a final expense coverage, the provider disregard age and health requirements.
This makes it ideal for older people or less-healthy individuals. Some get this coverage to protect their loved ones from paying out-of-pocket expenses. Thus, making it ideal for people who don’t want to be a burden to their families.
7. Mortgage Life Insurance
When you borrow money to buy a property, paying for it can be hard. With this, there’s a risk that the lender cannot collect their receivables. To prevent incurring a loss, banks and financial institutions offer mortgage loans.
In a mortgage loan, the lender can take your property if you fail to pay them on time. For security, get mortgage coverage to prevent losing your home. Providers designed this type of policy to cover your loan balance.
If you don’t want to burden your family with existing debts after passing away, get mortgage coverage. This type of policy only serves to help you repay mortgage debts.
Different Types of Life Insurance You can Get
Now you know the different types of life insurance. No one can predict the future, but there’s always a way to prepare for it. If you want to learn more about life insurance, check out our other blog posts.