Types of Life Insurance
Common Types of Life Insurance
Term Life Insurance
- Term Life Insurance provides coverage for a limited period of time. Upon expiration of the term expires, the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or opt for new coverage at higher premiums.The death benefit will be paid to the beneficiary only if the insured dies during the term.
Whole Life Insurance
- Whole Life is permanent insurance that remains in force for the insured’s whole life and requires (in most cases) premiums to be paid every year into the policy. Final Expense and some Single Premium products are examples of whole life policies.
Universal Life Insurance
- Universal Life is also a form of permanent insurance, where the excess of premium payments above the current cost of insurance is credited to the cash value of the policy. The cash value is credited each month with interest, and the policy is debited each month by a cost of insurance (COI) charge, long with any other policy charges and fees. Interest credited to the account has a contractual minimum rate of 2%. Indexed Universal Life, also referred to as Equity Indexed Universal Life contracts are pegged to a stock, bond or other interest rate index and offer non-guaranteed values dependent on index performance.
In sum, the type of life insurance that is right for you and your situation will depend on your financial goals. Is the insurance for covering debts for your beneficiaries, such as a mortgage or college expenses or is it for building cash value to take out policy loans?