You can get different types of life insurance from a wide array. Here, you’ll find complete help to break it down for you. Most of us talk about life insurance as it’s a single thing. When you a life insurance, you’re all set with your insurance plan, right? But, you need to ask what type of life insurance need after you’ve decided to buy a life insurance policy. So, this question may come with even some more queries. As it’s like something new that you’re learning about, but don’t worry, you’ll get all necessary information regarding the issue of various types of life insurance policies. Once you get the pros and cons of them all, then you can pick the suitable one that fits you best.
Besides, depending on how long they are in effect the different types of life insurance can be divided into term and conditions. So, let’s learn first what the different types of life insurance policies are. The specific types of life insurance are including:
- Term life insurance
- Whole life insurance
- Permanent life insurance
- Variable life insurance
- Universal life insurance
- Variable universal life insurance
- Guaranteed issue life insurance
- Simplified issue life insurance
- Final expense life insurance
- Group life insurance
Term life in the Different Types of Life Insurance
Term life insurance is of the well-known types of life insurance. It’s a “pure” insurance policy. You’re just paying for the death benefit that goes to your beneficiaries in the event of your death when you pay your premium. If you’re not around you want to make sure your death benefit covers all your beneficiaries’ needs. Although most people ask the insurance company for the lump sum, the death benefit can be paid out as a lump sum, a monthly payment, or an annuity. But, term policies are more affordable while comparing to its peers because you’re not paying for anything extra. It’s that cost between $30-40 a month for a 30-year, $500,000 policy for healthy people when they’re in the 20s and 30s.
Comparison with the Whole & Term Life Insurance
On the other hand, the whole life insurance in the different types of life insurance has a death benefit but also a cash value. It’s that where the premiums you pay annually or monthly are partly used to fund that cash value. One of its portions goes to maintaining the death benefit and the major part of the premium goes to fees for the first five years. The fees portion decreases where more of the premium goes directly to funding the cash value over time. A whole life insurance policy can cost four times as much as a term life policy due to the fees and the extra feature. Besides, the term insurance is also easy to understand. When the term of the policy is up you stop paying the premiums you’re only paying for the death benefit.
If the term ends after most of their obligations this works well for cover people. These include mortgage, student loans, and children’s education and so on. And there is no longer an issue and they don’t need that extra level of protection that life insurance offers. But, the whole life lasts for as long as you pay the premiums. Also, the cash value component may make whole life more difficult than term life. This is because you have to consider surrender fees, taxes, and interest as well as other conditions.
Permanent Life Insurance in Different Types of Life Insurance
As it’s an umbrella term, the Permanent life insurance covers several dissimilar and it’s more specific life insurance types. Usually, these policies will last for as long as you pay the premiums and they have a cash value component. As the whole life insurance is a type of permanent policy, as a result, there are several the same pros and cons that we already discussed above can apply to the other types. But, still, there is some key dissimilarity in the different types of permanent life insurance policies.
The Universal Life Insurance in Different Types of Life Insurance
Just like a whole policy, the Universal life in the different types of life insurance has a cash value. At this type of policy, your premiums go to both the death benefit and the cash value. But, know the twist of this policy and that’s the policyholders of universal life policies can change the premium along with the death benefit amounts without getting a new policy. Normally, you can use the cash value to pay the premium, but you have a minimum premium to keep the policy in force. It means that you can use that to skip premium payments entirely when you have enough money in the cash value.
But, remember that this can naturally only be done after the first year of the policy while letting the ensuing interest do the work. And only if you have at least enough cash value in the policy so that you can keep the policy enforcement for an additional 60 days. Moreover, it’s sensitive to current market interest rates when the cash value of a universal life insurance policy has an interest rate. The premium would have to increase to offset the compact cash value if the interest rate being credited to your policy reduces the minimum rate. Here, you have a chance to adjust the death benefit in limits outlined in the policy. While there may be fees to decrease it increasing it may subject you to further underwriting.
This flexibility that comes with the universal life insurance make attractive to some people, but it’s also confusing sometimes. It’s where you pay a certain amount every year or month plus know what the death benefit will be unlike term insurance.
Variable Life Insurance
Among the different types of life insurance, the key difference between whole life insurance and variable life insurance is how the cash value component works. The cash value component is a savings account with a whole life insurance policy. This is why there is a guaranteed minimum rate while the growth may be a small comparison to other investment options. It also comes with the dividend payments from the life insurance company. The cash value of a variable life insurance is more along the lines of what you can expect while you’re thinking to invest. It’s a series of mutual fund-like sub-accounts where you can get some decent growth. But, depending on the market you can also lose money. This is because the cash value is more or less placed in the stock market.
Besides, the potential for higher, tax-tardy growth makes it a “super-IRA” if this makes variable life insurance policies a better investment option than whole life policies. So, it lets you invest only in the sub-accounts that are available through your policy. It means that you don’t get to choose from the broad range mutual funds that are found on the open market. Plus, the product is riskier when the fees can be lower with a variable life insurance policy than a whole life policy. If you ask why then the same reason investing in stocks is risky. As you don’t know enough to make changes to the investment and you don’t know much about the stock market as well. To do it effectively there’s too much management for the average person.
Variable Universal Life Insurance in Different Types of Life Insurance
Well, you’re mostly right if you think variable universal life insurance is just several features of variable and universal life insurance policies combine together. Among the different types of life insurance, the variable universal life insurance policy takes the better of the other two policies. Or, it could be worst as well which is depending on how you look at it. While investing the cash value in the policy’s sub-accounts you can adjust the premium and death benefit amount. But, there are the same headaches as the other two comes with the variable universal life insurance. Moreover, it’s more difficult than most people looking for life insurance need. So, it could not be your best available option for an investment or insurance.
Simplified Issue Life Insurance
Usually, you go through a paramedical exam as part of the underwriting process when you apply for life insurance. As it’s the insurer digs into your health and then finds out how risky you are to cover with insurance. Ultimately, in the different types of life insurance, it puts you in line for the best possible rates since the insurer has more information about you because it helps them set your premium rate. You don’t have to go through that with simplified issue life insurance, though. It means that this is the “simplified” part of this policy type. A simplified issue policy gets you life insurance without the health exam that’s known as a “no exam policy”.
As you’re not out of the woods completely, though, you don’t need to go through the medical exam. But, answering questions like if you smoke, have been diagnosed with serious illnesses, and so on you do need to fill out a health questionnaire. When they have too many health issues, people in poor health may have to take the exam. Also, they could flat-out be denied by insurers. It might be a good option to skip scheduling the paramedical exam for those healthier people in a hurry. It’s that adds some time to the underwriting process. But, it’s that taking a major financial drawback with this benefit.
Besides, your premium rates are directly tied to your chances of outliving your policy with a term life insurance policy. And, you’ll pay lower rates than someone who is older and/or in poor health if you’re young and/or healthy. This is why it’s important to get the medical exam. The policies tend to be more expensive than term policies because there is no medical exam with simplified issue life insurance.
Guaranteed Issue Life Insurance
In the different types of life insurance, guaranteed issue life insurance takes the concept of simplified issue life insurance. It’s forgoing the health exam and takes it a further step in that you don’t have to answer any questions. As the questions are about your health if it’s fit enough. The insurer will cover you As long as you can pay the premium. And they need only your age, sex, and state of residence. Although others can get more life insurance coverage with a different policy type, it’s useful for elderly applicants.
Conclusion
These are about the different types of life insurance policy. But, these are not all of them. There is some more type of insurance policy. These include final expense insurance, group life insurance and much more. But, you’ll find the perfect policy if you speak to a licensed independent broker or agent. Or, you can get it searching and read the terms and conditions of different insurance companies through the internet.
