What life insurance policy is the right one for you? Learn which policy best fits your needs in this guide to life insurance types.
Life insurance is one of the best consumer protection products ever developed. For this reason, nearly 60 percent of Americans hold some form of life insurance.
At the same time, roughly 84 percent of Americans believe that life insurance is needed. Without question, life insurance is the best mechanism to care for your family in the event of an untimely death.
While the vast majority agree that life insurance is necessary, many wonder what the best type is. Read on for a comprehensive guide to the different life insurance types. Explore different plans like whole life and term life insurance to see which policy is best for you.
Term Life Insurance
Term life insurance is one of the most common policy types. Simply put, this type covers you for a fixed period of time. The most common terms are 10, 20, or 30 years.
When the term expires, you are no longer covered. However, this setup works for many families.
The objective of life insurance is to provide for your family after death. If the term expires, this means that your children are grown and independent.
One of the biggest advantages to term life insurance is the price. Many people do not realize just how affordable life insurance is.
Four of five Americans believe that term life insurance costs more than it does. You can check out the article “10 Facts and Statistics about Life Insurance that Will Blow Your Mind” from Simple Life Insure to learn more about the growing life insurance industry in America.
Another benefit of term life insurance is the policy payout and monthly premium are fixed for the entire term.
Whole Life Insurance
Unlike a term policy, whole life insurance is a permanent solution. It provides for lifelong coverage and the policy’s cash value grows over time.
In addition to the death benefit, there is an investment component to whole life insurance. A portion of the premium is directed towards investments that grow over time.
Not only do contributions accrue but there are also compounding earnings. Some plans offer dividends based on the company’s positive cash flow.
One of the most popular benefits of whole life is taking a loan out against the policy. You can borrow from the cash value to pay for home improvements or college.
Other Types of Life Insurance
While whole life and term are most popular, there are other types out there. Some insurers customize policies for their clients.
One alternate type is called universal life insurance. This closely resembles whole life, but does not have a cash value.
Indexed life insurance is another type. The policy’s cash value is tied to the performance of a major stock market index like the S&P 500. There are also variable accounts that tie the policy’s cash value to bonds, stocks, and money markets.
A Recap of Life Insurance Types
Life insurance is an effective safety net for your family. You can buy term life insurance that covers your family during the time of need. Also, there is a whole life plan that allows you to build cash value and borrow from it.
If you enjoyed this article about the various life insurance types, check out the reast of our blog for more great content.