Understanding different types of life insurance

Life insurance is never pleasant to talk about, but it is recommended to purchase a policy if you want to take care of your loved ones when you pass away. It is one of the most common employer-provided benefits. There are a few different types, depending on premium costs and investment options. Learning which policy best suits your and your family’s needs can be confusing, so we simplified the process by listing your options below. The first thing you need to know is that life insurance is divided into two categories: term life and permanent life. Term coverage is for a defined amount of time, while permanent plans last a lifetime.

1. Term life insurance

Term life insurance has a specific coverage period, but participants usually have the option to renew or change it into a permanent policy at the end of the term. With this type of policy, you will pay the same amount of money for a set number of years. The length of these plans usually falls between one and 30 years. Premiums typically start out at an affordable rate, but when renewed or converted into a permanent policy, rates can substantially increase. These policies do not hold any cash value, meaning you will not collect savings from your policy.

2. Whole life insurance

Whole life insurance is a type of permanent insurance that offers life-long coverage combined with a cash-value savings component. This type of policy has higher premiums than a term life policy. Premiums remain constant, and a portion is invested by the company, which becomes the cash value of the policy. Whole life insurance pays a fixed amount upon death. The guaranteed death benefit of whole life insurance will never decrease, as long as premiums are paid. This plan offers the most stability.

3. Universal life insurance

This is another type of permanent insurance policy that combines term insurance with the ability to earn interest on cash value, paying a market rate of return. The cash value grows tax-deferred and can be borrowed or withdrawn from the policy. This plan is more flexible than whole life insurance, as it also allows you to change your premium payments and death benefit within limits. Universal life plans typically provide the most long-term protection for your dollar.

4. Variable life insurance

Variable life insurance is similar to universal life insurance in the investment aspect and flexibility. However, instead of simply earning interest on the accumulated cash value, policy owners have more options and control on how to invest that cash. The ability to invest in professionally managed investment options allows for the potential to accumulate cash value while providing death benefits protection. However, there is a greater risk of loss due to this benefit.

Premium amounts will vary depending on different circumstances, like gender and whether you smoke or not. Women normally pay less in premiums than men due to a longer life expectancy. Rates can also increase or decrease based on various health conditions and family history.

For a better understanding of the rates and types of life insurance packages that best suit your family, contact CanopyNation today.