Obviously, there are different types of life insurance available for purchase. However, not all of them will make sense to everyone. That is so because needs differ and preferences are never the same.
So, the first step in determining which type of life insurance is best for you is to understand the different types of life insurance policies available.
Before we go into details, we’ll first explain what life insurance is first, then we proceed to the types of life insurance available to anyone looking to purchase its policy.
What is Life Insurance?
Life insurance is coverage that binds a provider to pay a certain amount of money to the beneficiaries of a policyholder in the event of the policyholder’s passing. The money comes from all the premiums the policyholder has been paying while they were alive.
Furthermore, the amount of premiums paid in life insurance depends on what your policy is covering. Also, your insurance company. These two, among others, have a lot to do with the amount the insured pays in premium.
By the way, when the beneficiary receives the payment, they decide what they want to do with the money. Except, of course, the policyholder stated otherwise.
In continuation, your type of life insurance determines a lot of things like what goes under coverage and what does not. So, before you make a decision, you must know all about the different types of life insurance options available to you.
Different types of life insurance
If you feel it’s about time you got your life insured. The providers will place a lot of options before you. This could become overwhelming for you as a newbie. For that reason, here is a rundown of different types of life insurance options.
- Whole life insurance Life
- Term life insurance 10 to 30 years
- Universal life insurance Life
- Mortgage life insurance Pay off mortgage
- Variable life insurance Life
- Credit life insurance Pay off loan
- Joint life insurance Life
Whole Life Insurance
This type of life coverage protects you for life and takes care of your beneficiaries in the event of your passing. As long as the premium continues, your life coverage continues. Also, your beneficiaries might decide to continue paying the premium if they so desire. In essence, whole life insurance coverage does not expire.
To continue, this type of life coverage typically has a lot of benefits attached to it.
First and foremost, you can borrow out of your cash value even while still alive. This categorically means that you can save with this coverage.
Again, your cash value is tax-advantaged. It means that all the money you saved through this coverage will never go through tax. Not even a dime out of it.
It is unlimited. You just enjoy the coverage and pass some cash value down to your beneficiaries.
What to consider
If you this whole life insurance is your choice, you have to consider some factors before you purchase coverage.
The provider of your choice of coverage plays a role in most matters. If you bought your plan from a mutual insurance company, expect to be receiving monthly or yearly dividends from your company.
Again, the amount you pay for your premium depends on the company that is providing your coverage.
What you wish to cover
Here, you have to put your age and health into consideration. These factors will determine your amount premium and how much you have to pay.
Term Life Insurance
Unlike whole life insurance, term life insurance has a specific limit for the policyholders. With this kind of insurance, you sign a contract that your coverage will last for a period of time. This lasts as long as 10 to 30 years and expires.
So, you get to choose how long you want your insurance to last. This will be paid out in lump cash to your beneficiaries in the event of your passing. More so, term life insurance favors young people more because the premium costs more for older people.
Universal Life Insurance
This coverage is another kind of whole life insurance. It is unlimited and protects you for life. Not just that, this coverage also helps you to build up a cash value while paying for your premiums. This cash value also remains tax-advantaged.
Another advantage of this coverage is the flexibility it offers. Therefore, it is up to you to choose how you pay your premiums. You can decide when to pay a lower premium or higher. All you must do is discuss it with your policy provider.
Mortgage Life Insurance
Mortgage life insurance takes care of your mortgage in the event of your passing. Here, your insurance coverage pays off your mortgage and gives the family that you left behind the comfort of a home. In essence, this coverage will make sure your family is not thrown away to the streets and left stranded just because they could not meet up with the mortgage.
However, this coverage mostly stops working if you or your family moves houses. This is to say, your mortgage life insurance works for your home until you decide to change home. It does not follow you to your new home, in most cases.
Variable Life Insurance
Firstly, this offers permanent life coverage for the policyholder. Again, it helps you to save money through cash value which is generally tax-advantaged.
Now, as a policyholder of variable life coverage, you can invest your money in third-party accounts. This could be risky because you can still lose all your money in a bad investment.
However, in a situation whereby everything goes well, your beneficiaries get a lump sum of payment in your passing.
Credit Life Insurance
This takes care of your debts majorly. That is, if you decide to take out a loan from either banks or loan offices, you will be offered this kind of insurance. Your credit insurance will be used to settle and pay off your loan to your debtors. In this type, nothing goes to your family directly.
So, if ever you think of going for a loan, also consider getting this insurance coverage. It protects your family from the harshness of paying debts if you pass.
Joint Life Insurance
Married people often go for this kind of coverage. It helps them save more from buying for each person. However, the beneficiaries must wait until the two insured people pass away.
Couples without beneficiaries can decide that their providers use their payout to fund a cause. Like charity or raising a foundation when they both pass.
Companies that offer life insurance
Mutual of Omaha
The Guardian Company
New York Life