Death is one of the only truly certain parts of life, and while it might seem depressing it still has to be planned for. After all if you're not around to care for your family and loved ones then who's going to do it? Life insurance is the most common way to provide for those you leave behind, but it's important to know all the types of life insurance available and the differences between the options before you just pick one.
Fortunately breaking down the differences is a fairly simple thing to do.
Perhaps the simplest form of life insurance out there, a term life insurance policy covers the policy holder for a given length of time. It might be one year, five years, or even 10 years or longer, but during that time period you pay your premiums and if something happens then the death benefit of the policy is paid to your survivors. If nothing happens then the policy needs to be renewed for another period of time or canceled which means it will never pay out the death benefit.
As the name implies this form of life insurance lasts as long as you do (provided that you keep paying your premiums). With permanent life insurance there's no gambling on whether or not you're going to be covered when the event happens, and as an extra added bonus it's possible to borrow money against the value of your permanent life insurance policy (in the event you need some of that value to pay bills and expenses before you die). While not as simple as term life insurance, permanent life insurance is still popular. Some of the varieties of permanent life insurance are below.
Whole life insurance is similar to permanent life insurance, but it is slightly different in that the premium paid never changes. This does mean that the premium will be higher early on, but since there's never another medical exam required the premiums will even out over the length of the policy. This can be a good value for those who want stability in their life insurance policy.
Universal life insurance is permanent life insurance with a twist; the twist is that you can change the policy to fit your needs. It sounds like something you should be able to do with any policy, but universal life insurance is designed specifically to adapt to your changing needs. So if you want to add features or take away ones you're not using, this is the policy for you.
The money in a life insurance policy gets invested, which is part of where the amount your beneficiaries receive comes from. Variable life insurance allows you some leeway in where your premiums get invested. Users can pick the mutual funds that are used, as well as numerous other things which can result in a faster and larger return on investment.
There are other, more specific versions of life insurance on the market, but these are some of the most common policies that buyers are going to run into. As always it's important to check all of the options, and preferably to consult with a financial expert before signing on the dotted line.
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