Life insurance is merely a pledge to pay a benefit in return for a premium. What is different about the promise of life insurance in various products is that it can be either short-term (Term Life Insurance) or long-term Whole Life Insurance or Universal Life Insurance.
Different Types of Life Insurance
1. Term Life Insurance
The most affordable life insurance available is temporary life insurance because people purchase it to cover the applicant’s temporary needs. Of all life insurance types, term life insurance is the least costly. It provides coverage for a finite time (the term) and creates no cash value.
Pro: Affordable rates, optional additions that can extend the coverage, and the opportunity to upgrade the policy to permanent life insurance before it expires without going through a medical subscription.
Con: It provides immediate coverage and, over time, generates no-cash value.
2. Whole Life Insurance
Whole Life Insurance is the oldest life insurance plan available today. This life insurance intends to provide the policyholder with a lifetime death benefit.
As long as the periodic premiums are paid, the life insurance provider cannot terminate the insurance policy for any reason. The policy will remain in effect for the life of the insured.
Pro: As the policy creates cash value over time, through policy loans, cash withdrawals, or through surrendering the cash policy, the policy owner can access those funds.
Con: Whole life insurance rates are higher than other insurance forms since the policies last for the insured’s life, so the death rate for whole life insurance is much higher than a non-permanent policy such as term life insurance.
3. Universal Life Insurance
Universal Life Insurance is a permanent life insurance policy with a cash portion attached, equivalent to whole-life insurance. Many identify it as a life insurance term with an associated annuity.
Pro: Universal life insurance is a versatile policy. When required, the policy owner may alter a monthly premium, raise, or decrease the death benefit to accommodate life events.
Con: Fees for policy and management will adversely affect policy development over time.
4. Variable Life Insurance
Universal life is available as a product of Variable as well. The critical difference between conventional permanent life insurance and flexible life insurance is how each policy’s cash portion pays the interest.
Pro: Policy owners can easily withdraw cash from the policy through policy loans deemed tax-exempt.
Con: Variable life insurance plans will lose their cash value if the economy performs poorly, unlike most insurance products used for wealth accumulation.
5. Simplified Issue Life Insurance
The word “simplified” defines a life insurance policy’s underwriting mechanism rather than the form of life insurance. For example, as all insurance forms often have no-exam policies available to prospective consumers, term life insurance and whole life insurance may also be more straightforward life insurance.
Pro: There is no need for medical tests, and policies are usually issued in a matter of days rather than weeks.
Con: Simplified life insurance is usually higher in price than insurance plans that are entirely generally underwritten.
6. Guaranteed Issue Life Insurance
Like simplified issue life insurance, Guaranteed Issue Life Insurance refers to an underwriting procedure rather than a policy form.
Pro: Approval for life insurance coverage is for individuals with severe or multiple health problems that cannot qualify for conventional life insurance.
Con: Premiums are considerably higher than standard life insurance, death benefits are at about $25,000, and there is a waiting period of 2 years.
Things to Think About When Choosing a Life Insurance Policy
It would help if you connected with an unbiased insurance agent who represents several insurance providers that sell several products to ensure that you choose the suitable form of life insurance to suit your needs and budget.