The number and different types of life insurance can cause much confusion to the new life insurance agent and in some cases to the life insurance buyer.
Each life insurance policy type is designed to fit particular needs. People and businesses have different needs for coverage.
You will get a brief overview here of most types of life insurance and how each one can be applied to your particular needs.
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Different Types Of Life Insurance
- Decreasing Term Life Insurance Policy
One policy that sets itself apart from all other types is decreasing term life insurance. As the name implies the face amount of the policy gradually decreases over the years.
The most common area where your need for life insurance decreases is when a policy is used to erase a mortgage debt when the homeowner dies. This policy perfectly fits that type of situation. The premium remains level for the duration.
All other life insurance policies are level death benefit policies but each of them have unique twists that policy buyers may find useful.
- Yearly Renewable Term Policy
This type of policy has a level death benefit as mentioned before, however, the premium increases every year if you choose to keep the policy. Here you have a one year term policy with the option of renewing it every year.
Because you are older you pay the premium for the older age. This is life insurance in it’s purest form. You would use this to pay off outstanding debt in the event of your death.
- 5 Year And 10 Year Term Policies
These types of life insurance policies maintain a level death benefit for 5 or 10 years…depending on which policy you choose. These policies are also used to take care of fairly short term life insurance needs. You will find these level premiums to be quite inexpensive.
- 15 Year, 20 Year, 25 Year And 30 Year Term Policies
A greater number of these types of life insurance policies that we are about to discuss are sold than any other. These are level premium term policies designed to take care of long term life insurance needs. Your choice would depend on how many years you need to be covered…
Let us assume you are using this policy for family protection. You have a child 3 or 4 years old. You need to be assured that the child and surviving parent can attain all desired goals in the event of the death of the insured.
Because you want to provide sufficient cash or income at least until the child graduates college a 20 or a 25 year term policy would fit the bill. Had the child been older you could use the 15 year term policy.
- Whole Life, Universal Life, Variable Universal Life And Variable Life Policies
The premiums for these types of policies are much higher than those of the term policies…but they can fulfill an important need. If you have a desire to accumulate some cash through your life insurance policy these are the policies designed for that.
You can use the whole life policy and the universal life policies as vehicles through which you can save money. The returns are not very high on these types of life insurance policies though…
You have a better chance getting a high return on your money if you invested in a variable universal life insurance policy or a variable life policy. These types of life insurance policies are sold by prospectus only and the agent needs an N.A.S.D license before he can discus them with you.