What Are The Different Kinds Of Life Insurance Plans?

By Patrick Cooper Posted in Life Insurance News



Life Insurance

There are two basic classifications of life insurance; temporary term life insurance and permanent life insurance. These two can be subdivided into several different policy options.

Term Life Insurance

Term life insurance is the most inexpensive type of life insurance. Simply, it is life insurance purchased for a specific amount of time, or term. Once the term is up the insurance policy is no longer valid. For example, if you purchase a term life insurance policy for ten years, then you pay monthly premiums for ten years. Once the ten years is up, then you no longer pay premiums but you no longer have life insurance. While this type of insurance may be the cheapest way to go there is nothing to show for all those premiums once the term is up. The return on investment is nil.

Permanent Life Insurance

Permanent life insurance offers the greatest variety of policies, some of which operate more like an investment fund than an insurance policy. There are four major sub-categories of permanent life insurance; endowment, whole life, universal life, and limited pay life insurance.

Endowment life insurance policies have a built-in cash value that equals the death benefit once the insured reaches a certain age. For example, if the cash value of the policy is $50,000, then that is how much the death benefit would be.

Whole life insurance is the most popular of the permanent life policies. With a whole life policy you pay a level premium with a cash value table built into the policy. Some of the advantages of whole life are guaranteed death benefits and a guaranteed death benefit.  Some disadvantages include  inflexibility and the low return on investment.

Universal life insurance is a relatively new type of  insurance. It provides permanent insurance coverage with greater flexibility. There are several different types of universal life insurance policies  including traditional fixed universal life insurance, equity indexed universal life insurance, and variable universal life insurance.

Limited life insurance policies work sort of like term insurance except when the term is up the life insurance is still active. You pay a premium for a limited number of years but the policy is active until death.

Related posts:

  1. What Is Life Insurance?
  2. Is Whole Life Insurance A Good Investment?
  3. What Does Traditional Fixed Life Insurance Mean?
  4. What Does Permanent Life Insurance Mean?
  5. What Is A Limited Pay Life Insurance Policy?






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