What Is Life Insurance? An Overview

Types Of Life Insurance

There are two main types of policies that you can choose from. Here’s a brief overview of both to help you choose your desired policy.

Term Life Insurance

Term life insurance is applicable for a set period of time that is determined while confirming the policy with an insurance company. With this type of life insurance, the designated beneficiary receives the death benefit, if the insurance holder happens to pass away within the specified term in the policy.

The insurance policy offers relatively more affordable premiums, and is generally preferred by people who look forward to buy life insurance that lasts for 30 years.

Permanent Life Insurance

Permanent life insurance is applicable for the insurance holder’s life-time, rather than a specific period of time. It can be further classified into three types, namely; Whole Life Insurance, Variable Life Insurance, and Universal Life Insurance. All of these policies holds a cash value, and the death benefit gets paid at the cash value.

The most significant difference amongst these types of permanent life insurance, lies in how the premiums and cash value fluctuate.

When it comes to whole life insurance, the cash value goes into a series of fund-like multiple sub-accounts. Their value can fluctuate according to the market, and can be borrowed or withdrawn at any point in time. Whereas, with universal life insurance, the policy has a cash value with flexible premiums and adjustable death benefits.

Under this itself, indexed universal life insurance has potential for bigger gains in cash value according to stock market performance. Likewise, guaranteed universal life insurance has a fixed premium rate without the risk of market fluctuation. On the other hand, variable universal life insurance’s interest rate is set by the company, and its cash value can fluctuate as well.