Purchasing a life insurance policy can be tricky if you don’t understand the different types of policies that are available. As soon as you start shopping for insurance you will encounter a new vocabulary,, like “cash value”, “term”, and “whole life” insurance. It’s important to understand what types of life insurance policies are available, and what they offer. This way you can be sure that you are getting the type of policy that will work best for you.
The most common types of life insurance include:
Term Life Insurance
With this type of life insurance you’ll purchase a policy that has a set term, and during this term you’ll pay premiums on your policy. Once the term is up, you will no longer have any death benefits, plus the policy has no cash value, even while you are paying premiums. Term life insurance is among the least expensive types of insurance to buy.
The length of term life insurance varies from 10 to 30 years, and there are some advantages to this type of policy. It is a good option for those that cannot afford other types of life insurance policies, plus it is the best type of insurance policy for those that are only worried about coverage for a certain amount of time. This may be while their children are young, or while they are still paying off their home mortgage.
Universal Life Insurance
This type of life insurance is much like the term life insurance, though it does have a cash value. The reason that you get cash value from this type of policy is that a percentage of your premiums are put into a cash account that you’ll earn interest from. Universal life insurance policies are more expensive than term life insurance, but some of that money is available to you through loans on the policy. You can also get variable universal life insurance, with the main difference in this type of policy being that you have more control over how the cash value is invested.
Whole Life Insurance
With a whole life insurance policy, you’ll have coverage up until you die. This policy does have a cash value, but the benefits that are paid out, as well as your premiums, are fixed. This type of policy is the most expensive, but it does come with the comfort of knowing you will be guaranteed coverage and your premiums will not increase over time. Of course this also means that you will not have the option of lowering your coverage or premiums if you want to do this at a later time. There is a cash value on this type of life insurance policy, but the interest rate may not be as high as it would be in a savings account.
Choosing the right life insurance policy is important, so you’ll want to take the time to research all the different advantages and disadvantages of the various types of policies that are available.
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