Types Of Life Insurance Policies

Types Of Life Insurance PoliciesWhen considering the purchase of life insurance, there are several types of life insurance policies to choose from. Not every policy is the same, and factors such as cost, structure, and duration of the policy should be considered, along with the amount of death benefit associated with the policy.

* Whole Life Policies

A Whole Life Insurance policy gives guaranteed, permanent insurance protection for the entire lifetime of the insured party. These policies accrue a “cash value” amount on them that slowly builds up as time passes. The premiums on whole life policies generally remain the same for the lifetime of the policy, as well as the death benefit. The insured may be able to borrow cash from the policy from time to time, and the cash is tax deferred. However, borrowing from the policy will decrease the amount of death benefit available until it builds interest back up again over the years, or is paid back.

* Universal Life Policies

A Universal Life Insurance policy is also known as an adjustable life policy, and varies slightly from the whole life policy. Like whole life, this policy provides a cash value and is a permanent policy. Unlike whole life, the universal life policy has premiums, cash values, and protection amounts that can be changed or adjustment throughout the life of the policy to fit the needs of the insured party.

*Variable Life Policies

The Variable Life Insurance policy combines a traditional type of protection and savings associated with a whole life policy, but also combines it with the growth potential associated with investment funds. This type of policy features a general account that acts as the liability account, as well as a separate account that is comprised of various investment funds. Due to the investment feature aspect of this type of policy, both the cash value and amount of death benefit are subject to fluctuation.

*Variable Universal Life Policies

Variable Universal Life policies combine two types of policies, universal life and variable life, offering flexibility to the insured. The consumer has the option to adjust premiums, selection of investment benefits, and death benefit amounts. These accounts are considered to be securities, and are subject to regulation by the Securities and Exchange Commission. With this type of policy, the risks associated with the investments are that of the policy owner, so this type of policy may be riskier than others.

* Term Life Policies

A Term Life Insurance policy is the most common type of life insurance policy. This policy offers the benefits of providing financial protection to beneficiaries upon the policy holder’s death. Term life will pay the policy at face value, but will only provide insurance protection for a specified amount of time. Most policies offer a protection term of 30 years. However, with term life, premium rates will increase as the policy holder ages.

* Conclusion

It is helpful to review the different features and terms offered by each of these types of life insurance policies before determining which type you would like to purchase. Determine your specific needs,the amount of money you are willing to spend on the policy, as well as the benefits you would like to receive from the policy long term.