Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured. There are several types of life insurance policies available, each with their own unique features and benefits. Here, we will go over the different types of life insurance and their key characteristics.
Term life insurance: This is the most basic type of life insurance. It provides coverage for a specified term, usually 10, 20, or 30 years. If the policyholder dies during the term, the death benefit is paid to the beneficiaries. If the policyholder outlives the term, the policy has no value.
Whole life insurance: Also known as permanent life insurance, this type of policy provides coverage for the policyholder's entire life. The death benefit is guaranteed and the policy also accumulates cash value over time. Whole life insurance is more expensive than term life insurance, but it can also be used as a savings or investment vehicle.
Universal life insurance: This type of policy is similar to whole life insurance, but it provides more flexibility in terms of premium payments and death benefit amounts. Policyholders can adjust their coverage and make changes to their policies as their needs change.
Variable life insurance: This type of policy also provides permanent coverage, but the death benefit and cash value are linked to the performance of underlying investments, such as stocks and bonds. Policyholders can choose how their premium dollars are invested. This type of policy carries more risk than traditional life insurance policies.
Guaranteed issue life insurance: This type of policy is designed for individuals who may not qualify for traditional life insurance due to health or age issues. It typically has higher premiums and lower death benefits than other types of life insurance.
It's important to consider your individual needs and goals when choosing a life insurance policy. It's also a good idea to speak with a financial advisor or insurance agency like Crosswinds Insurance Agency to determine which type of policy would be best for you.