Types Of Life Insurance Policies
The COVID-19 pandemic has been a wake-up call for people to take a closer look at their personal finances, including life insurance. Two-thirds of Americans are reassessing their finances due to the pandemic, according to a July 2020 study by Life Happens, an industry-funded education group.
Respondents said the pandemic has changed both family conversations and behaviors around finances. Now they are less likely to avoid talking about finances at the table. The best conversations at the table, according to the Life Happens survey, are:
- Wills and inheritance: 33%
- Current health issues and concerns: 32%
- Life insurance coverage: 30%
- Current financial status: 29%
- Emergency savings: 27%
Americans don’t think they’ll be comfortable with their financial situation for another 8.5 months, on average, according to the survey. And 66% believe the pandemic has helped them better understand life insurance.
Whether the pandemic or other reasons prompted you to purchase life insurance, it is always a good time to shop. Waiting only leads to higher quotes, as you age and potentially develop health conditions that will affect the rates that are offered to you.
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When you start shopping for life insurance, you will be faced with two main decisions right away: What type of life insurance is best for me? And how much life insurance do I need?
As you get life insurance quotes and options, you will likely navigate to a type and amount of coverage that matches the amount you want to pay.
To begin your search, here is an overview of the types of life Insurance Policies and the main points to know for each.
- Term life insurance
- Whole life insurance
- Universal life insurance
- Group life insurance
- Burial insurance/funeral insurance
- Survivorship life insurance/joint life insurance
- Mortgage life insurance
Credit life insurance
The Basics: This is one of Insurance Policies. Term life insurance has a specific end date of coverage. The length of coverage options are generally 5, 10, 15, 25 or 30 years. It is the cheapest way to buy life insurance because you are only buying insurance coverage, for a finite period, and you are not paying for a cash value component within the policy.
Who is it good for?
Term life insurance is ideal for people who want life insurance coverage for a specific debt or situation. For example, some people buy it to cover their working years as an income replacement for their family. Some people buy term life to cover years of a mortgage or other major debt.
Disadvantage: You could survive a term life policy. If you still need coverage after it expires, you might find new life insurance extremely expensive based on your age and any health conditions you’ve developed.
Whole life insurance
Whole life insurance is a Type Of Life Insurance Policies
The Basics: This is one of Insurance Policies.Whole life insurance can provide coverage for your entire life. An account within the policy builds cash value over time by using part of your premium payment and adding interest.
A policy will have built-in guarantees that the premium will not increase, the death benefit will remain the same, and the cash value will earn a fixed rate of return.
Who is it good for: Life insurance is suitable for people who want coverage for life and are willing to pay for the guarantees provided by the policy.
Disadvantage: Due to the guaranteed features, whole life insurance is one of the most expensive ways to buy life insurance.
Universal Life Insurance
Universal Life Insurance is a Type Of Life Insurance Policies
The Basics: This is one of Insurance Policies Universal Life Insurance (UL) can be difficult to understand because there are a few varieties and with very different features. The common element is that Universal Life can provide coverage for life. It can be cheaper than whole life insurance because it generally does not offer the same guarantees.
With some forms of universal life, you can vary the amounts of your premium payments and readjust the amount of the death benefit, within certain limits. UL policies often have a cash value component.
Who is it good for? Universal life can be good for someone looking for lifetime coverage. Some varieties of UL are suitable for people who want to link their cash value earnings to market performance (indexed and variable universal life insurance).
Disadvantages: If cash value is your primary interest, not all UL policies guarantee that you will make a profit. And if you’re interested in flexible premium payments, you need to keep an eye on the status of your policy to make sure the policy fees and charges don’t drain its cash value and cause it to expire. Understand what is guaranteed within a UL policy and what is not.
Check out our ratings to find the best life insurance companies.
Burial and funeral insurance
Burial and funeral insurance is a Type Of Life Insurance Policies
The Basics: This is one of Insurance Policies You may see this type of policy called burial, funeral, or final expense insurance. Regardless of the name, it is usually a small whole life insurance policy that is intended to pay only for funeral costs and other final expenses. It is often offered as a policy that cannot be refused and does not require a medical exam.
Who is it good for? These types of policies are generally for people with health problems who have no other life insurance options and who need insurance for funeral expenses.
Disadvantages: Burial insurance policies are expensive, depending on how much coverage you get. They also have a protection for the life insurance company: your beneficiaries will not get the full death benefit if you die within two to three years of purchasing the policy.
Please see the policy schedule for these “graduated death benefits.” Your beneficiaries may only receive a refund of the premiums you paid, plus some interest.
Survival life insurance
Survival life insurance is a Type Of Life Insurance Policies
The Basics: This is one of Insurance Policies .These joint life insurance policies insure two people under the same policy, like a husband and wife. Payment to beneficiaries is made when both have died. You may see them called second-to-die life insurance, but for understandable reasons, the industry is moving away from this name.
Survival life insurance can be less expensive than buying two separate life insurance policies, especially if one of the people has health problems.
Who is it good for? These policies are beneficial in estate planning when a beneficiary does not need life insurance money until both policyholders have passed away. Survival life insurance could be used to fund a trust, for example. It is also suitable for high net worth couples who want to provide money to the heirs for inheritance taxes. Or it could be used by a couple to make a donation to charity.
Disadvantage: If two spouses are insured and one would suffer financially if the other died, this is not the right type of policy. The surviving spouse does not receive any life insurance benefits. Payment is only made when both have passed away.
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Mortgage Life Insurance
Mortgage Life Insurance is a Type Of Life Insurance Policies
The Basics: This is one of Insurance Policies .Mortgage life insurance is designed to cover only the balance of a mortgage and nothing else.
This type of policy is different from previous types of life Insurance Policies in two main ways.
First, the death benefit is paid to the mortgage lender, not to the beneficiary of your choosing. Second, the payment is the mortgage balance, or partial balance if that’s what you secured.
Who is it good for? Mortgage life insurance is intended for people who are primarily concerned that their family will be burdened by the mortgage if they die. It can also be attractive to someone who does not want to undergo a medical exam to get life Insurance Policies.
Disadvantage: This type of policy will not provide financial flexibility for your family.
If you are looking for life insurance to cover a mortgage or other debt, you will be better off with term life insurance. You can choose the length and amount of the term, and provide more than just mortgage money to your family. Your family can use a payment for any purpose. They can decide to use the money elsewhere.
Credit life insurance
The Basics: Like mortgage life insurance, credit life insurance covers a specific debt.This is one of Insurance Policies. When you get a loan, they may offer you credit life insurance.
The payments can generally be incorporated into your loan payments. The life insurance payment is the balance of the debt and is paid to the lender, not to his family
Who is it good for? If you are concerned about how your family would pay off certain debt if you passed away, credit life insurance may seem attractive and convenient. It can also be attractive because no medical exam is required to qualify.
Disadvantage: credit insurance Policies are very limited and do not allow for future financial flexibility. You’re probably better off with term life insurance, which you can use to cover many concerns, from debt to income replacement to funeral expenses. A more comprehensive policy, such as term life, will give your family more financial options if you die.
Supplemental life insurance
Supplemental life insurance is a Type Of Life Insurance Policies
The life insurance you can have through work is supplemental life insurance, also known as group life insurance. Set rates based on the group, not the individual.This is one of Insurance Policies
Who is it good for? Because it’s generally free or inexpensive, group life insurance has a good value. Serves as supplemental coverage for your own individual life insurance policy.
Disadvantage: If you lose your job, you usually lose life insurance as well. That is why it is best to have your own life insurance that is not tied to the workplace. Also, you can purchase higher amounts of insurance on your own.