When going to purchase life insurance, it is important that you know there are different types out there. You will need to explore all of the types to find what is best for you. Even if you have a policy, it is important that you read your policy and understand what you have. Below is a brief outline of what types of life insurance are out there.
Term life insurance is when you purchase a policy that provides you with coverage for a defined period of time. You pay a premium during that time. If you pass away before the time period elapses than you can receive the benefits, but if you claim after the time period than you can not receive the benefits. Term life insurance is known to be inexpensive and also easier to understand, making it very popular for the masses.
Whole life insurance pays a benefit for as long as you’re paying the premium. Along with the benefit, you also accrue a cash value through the years. The cash value can be used as an investment and can be withdrawn for things such as education or emergency situations but will not be distributed if not used at time of the death benefit. This type of policy is more expensive than term.
Universal life is similar to whole insurance but is more flexible because you able to increase or decrease the death benefit and cash value throughout the time period. Because of this, it is more expensive than whole insurance.
When you are employed, Group Life Insurance is often a benefit offered. Group Life is basically a contract with a life insurance company which contains a group of people. This is a benefit that can cover your needs or sometimes people have supplemental policies in addition to what is offered by their company. The convenience of this policy can’t be beat. It is typically free to the employee so they get the benefit without having to do anything.
Advantages and Disadvantages
Each type of insurance has its advantages and disadvantages. What you think is best is based on personal preference and opinion. Many families choose to hold multiple policies of each to cover their bases. You can have more than one policy
People use life insurance for many different things. Life Insurance uses include investment, cash flow, loans, chronic illness, tax shelter, supplement retirement, enhance income, and college tuition to name a few. It is best to speak to a professional about how you can use your policy to help you.
Hopefully this information allows you to understand life insurance and the types of policies that are out there.