If you opt for life insurance, you must not be entirely relying on your life insurance agent. Instead, you should gather some helpful information in this matter and understand: “What is life insurance?” & “What are the different types of life insurance?”
Educating yourself about life insurance is crucial because it will also help the insurance company understand your long-term plans and intentions.
Types Of Life Insurance
There are four major types of life insurance. However, the fourth type, whole life insurance, is considered a separate category and often not included in life insurance.
So, on the safe side, we can say there are three types of life insurance.
- Term Life Insurance
- Universal Life Insurance
- Variable Universal Life Insurance.
Let’s discuss them one by one.
Term Life Insurance
The word “Term” in Term Life Insurance refers to the period for which it is applicable.
It is the most expensive type of life insurance. Nevertheless, it offers fixed premiums, and you have to pay it yearly. Usually, this type of insurance lasts for a certain period, such as one decade, 20 years, 30 years, etc. It provides no cash value and is a significantly less beneficial option when it comes to investment.
If you want to get the maximum benefit out of Term Life Insurance, it is better to convert it into whole life insurance. Converting your term Life Insurance into whole life insurance is known as Term Conversion. It usually happens when the person suffers from some chronic illness and wants to get coverage after the term ends.
Universal Life Insurance
Universal life insurance is quite similar to whole life insurance because both of them are permanent insurance options. Still, there is a difference between both, and universal life insurance offers a flexible premium. In contrast, whole life insurance strictly follows the level premium or fixed premium policy.
It is also not a legal investment and is often adopted for its cash value.
Variable Life Insurance
It is somewhat similar to universal life insurance because it also offers a flexible premium value. Moreover, the cash value also rises with time. It is also a permanent insurance option and does allow for loans or withdrawals.
Term vs. Universal vs. Variable Life insurance
- In Term Life Insurance, you can choose the length of the policy, while it is not applicable in universal and Variable Life Insurance.
- All three offer death benefits.
- Term Life Insurance does not have any living benefits, while Universal and Variable Life Insurance does have living benefits that can be gained in increasing cash value.
- In Variable Life Insurance, the cash value is linked to investments. It does not happen in other types of life insurance.
This article has directly answered “What are the different types of life insurance?” and explained the basic information about life insurance and its types. Different types have different benefits and costs, and you can choose the one that seems best for your unique insurance needs.