Here you have an opportunity to examine the different types of life insurance policies. All life insurance policies fall under one of two headings…term insurance or permanent insurance. Let us now take a few minutes to look at these two types of life insurance policies…so you can determine which would best work for you.
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If you are in need of life insurance for a specific period of time term insurance may be what you are looking for. Except for one, all term policies have a level death benefit for the entire duration of the policy…it never decreases. The decreasing term policy has a death benefit that decreases in a uniformed manner over the lifetime of the policy.
The premiums of term policies are low cost compared to the cost of permanent insurance policies. Beginning with term insurance the different basic types of life insurance policies are:
- Decreasing Term Insurance. This policy is usually used to cover the balance owed on a mortgage.
- Increasing Premium Term Insurance. This is generally used for short term needs. Often used to assure that funds will be available for college costs in case the breadwinner dies.
- 5 Year Term Insurance. This policy is also used for short term needs…may be to cover a short term loan. Because it is inexpensive it is sometimes it is used on a temporary basis until the owner can afford the insurance s/he really wants.
- 10 Year Term Insurance. Sometimes this policy is used in family situations if, for example, the children are in their teens and the parents feel there will be no need for life insurance after 10 years this type of life insurance may be what they are looking for. If later on they decide there will be a need for a longer period the owner can always convert to one of the other types of life insurance even if s/he is in bad health. They convert to a permanent policy.
- 15 Year Term Insurance. This is one of many types of life insurance policies used for family situations. It provides a lump sum or income to the beneficiaries.
- 20 Year Term Insurance. This is a very popular policy and is generally used for family situations and sometimes by business people to fund buy sell agreements or to insure key personnel.
- 25 Year Term Insurance. This plan is again one of several types of life insurance. It is designed to fall neatly between the 20 year term policy and the 30 year term life insurance policy. This policy is used to provide a lump sum or income for the family in the event of the death of the breadwinner or for business insurance needs.
- 30 Year Term Insurance. This type of life insurance policy is used in a similar manner to the 20 year term policy. It lasts 10 years longer and is usually a little more costly as a result.
If you want to buy life insurance, just pay the premiums, and not worry about it for the rest of your life permanent life insurance should be considered. These types of life insurance policies consist of whole life insurance, universal life insurance, variable life insurance and variable universal life insurance. The face amounts of these types of life insurance policies are usually level for the rest of your life if you don’t change it. If you want to change the face amounts you may, but that is your decision. The premiums are also level unless you change them.
Permanent Life Insurance
- Whole life insurance. This policy maintains a level premium as well as a level death benefit for the rest of your life. Guaranteed cash values are available to you usually after a year or two. Also can earn dividends. Dividends are not guaranteed.
- Universal life Insurance. This policy has a level death benefit that you may chose to increase or reduce at any time. You can also reduce or increase the amount applied to saving. The policy is a combination of term insurance with a savings element attached.
- Variable life Insurance. This is similar to the universal life except for the fact that the savings element is invested in securities allowing you the opportunity to get a greater return on your money. The risk is also increased when you invest in these types of life insurance policies. This policy has a whole life base. It is only sold with a prospectus and the agent has to possess an NASD license.
- Variable Universal life insurance. These types of life insurance policies were born from taking the best aspects of universal life insurance and variable life insurance and putting them together. The result is one of the best types of life insurance policies you can buy.
If you examine these types of life insurance policies in more detail you will be in a better position to make an informed decision…as to which would be best for you and your family.
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