In the US alone, 57% of adults have some type of life insurance, and only 30% of those have sufficient coverage.
If you still don’t have life insurance or health insurance, one of the best things you can do is get one early. About 40% of those insured wish they got their policies at an earlier age because it comes with significant benefits. Now, there are many types of life insurance policies to choose from, and while it’s advisable to start now, it’s better to understand exactly what you need.
In this guide, we’ll help you understand what each type has to offer.
Term Life Insurance
Term life insurance offers coverage for a specified time of your life, which could be between 10 and 30 years. This insurance policy is also referred to as pure life insurance because, unlike whole life insurance, it has no cash value. The thing is, your beneficiaries will only get a death benefit payout from the policy if you pass away during the active term.
The death benefit can be payout as a lump sum of money, on a monthly basis, or annually. This is the simplest and most affordable life insurance policy. Most term life insurance policies have level premiums, which means you’ll pay the same amount each month.
You need to understand that once the term is over and you’re still alive, you’ll get no coverage after that. You’ll either have to get a new policy or continue your life without one.
A new policy will be more expensive because you’ll be older, and the older you are, the more expensive life insurance gets. However, some of the best life insurance companies will allow you to convert your term policy to whole life policy.
Whole Life Insurance Policy
One of the best types of life insurance out there is the whole life insurance policy. The coverage will last the rest of your life, and you’ll get a cash value component, which means you won’t pay taxes on gains. As long as you keep paying the premiums, the death benefit will be guaranteed.
The cash value has several benefits that you can take advantage of while still alive. It may take a few years, but you’re allowed to borrow money against it when it grows into a substantial amount. Your cash value can also earn dividends depending on the insurance company you choose, and it can be used to increase the value of your policy.
Universal Life Insurance
If you want one of those permanent types of life insurance, then consider universal life insurance. Just like whole life insurance, it offers cash value and coverage for your whole life. The only difference between the two, however, is how flexible the premiums are.
A universal life insurance policy allows you to raise or lower your premiums as you need within the policy limits. However, if you pay less when starting, you may need to pay higher premiums in your later years to keep the coverage. This is a life insurance policy that you can adjust depending on your life circumstances, like marrying, having a child, or moving to a different job.
Final Expense Insurance Policy
This is a policy that’s designed to cover end-of-life expenses like burial or funeral costs only. It’s a permanent coverage as long as you keep paying the premiums, and even though it’ll remain in effect, you’ll not get any cash or investment value. This policy is most suitable for older people whose children are already independent.
This way, they will have all their final expenses taken care of without placing a burden on the loved ones. However, younger families that require more financial support will not get as much help as they would need from this coverage.
Simplified and Guaranteed Issue Insurance
Most life insurance policies are usually underwritten as they require individuals to go through a medical test to assess the level of risk. If you go for the simplified issue or guaranteed issue policies, then you won’t need to go for a medical exam. These policies are most ideal for older adults who may not qualify for other types of life insurance or those with serious health conditions.
Most final expense policies and some term life insurance policies are simplified issue or guaranteed issue policies. Instead of a medical exam, you’ll have to fill out a health questionnaire for a simplified issue policy, and you won’t have to undergo a medical exam for a guaranteed issue policy either. While this may seem appealing, the downside of these policies is that you’ll get lower coverage compared to other policies, and you may have to pay higher premiums since insurers assume high risk.
Group Life Insurance
Getting life insurance may seem like a huge expense for some. Ask yourself, “Do I need life insurance?” “Can I afford it?”
If you do but can’t, you may want to consider group life insurance instead. This is a type of life insurance that you purchase as a group, and it could be any group like a member organization or an employee package.
These policies come with relatively low premiums because you’ll be buying in bulk, and they could be simplified issues if you have older members or individuals with complicated health conditions in the group. Understand that a group insurance policy may not be able to offer you as much coverage as you’d like, but is better than not having a policy at all.
Different Types of Life Insurance Policies: Everything You Need to Know
These are some of the different types of life insurance policies to choose from. In general, they are affordable and offer straightforward protection. Compare all these options to decide which one is most suitable for you and your loved ones. Beyond that, if you’d like more intriguing and valuable content about lifestyle, business, technology, travel, and more, please check out our news website today!