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Home / Insurance / What are the three main types of life insurance? • The insurance problog

What are the three main types of life insurance? • The insurance problog

There are three main types of life insurance: whole life, universal life and term life insurance. In each of the three broad types, there are many variations of each, but we will look at the broad categories as we point out some of the finer points of each type.

And just to be clear, this site will never say that one type of life insurance is better than another. Each category serves its own unique purpose for unique circumstances.

Remember first and foremost that there is life insurance to pay a death benefit to your or your chosen recipients when you die. Almost all types of life insurance policies also offer some form of living benefit nowadays.

Okay, let's take a look at the three main types of life insurance now. [19659005] The whole life insurance

Within the whole life insurance you can stumble across that it is referred to under different names. The two most common besides calling it whole life are "straight life" or "permanent life". We save you the history lesson and just add that the whole life insurance is the original type of life insurance. It has been offered in its most modern form since the 19th century.

If you are looking for absolute warranties, there is no product that can be compared to a lifetime. In addition to its promise to pay a death benefit if the premium has been paid, it also offers a very stable and secure savings plan. There are all sorts of opinions on the internet about whether your whole life is good, if it's worth it and / or it's just a total ripoff.

From personal experience we can definitely say that it is not a ripoff. That being said, it should be used in the right way for the right people. Policy design, attitude and service are extremely important for the insurance owner to get a satisfactory result, especially when looking at the savings component which is formally called the cash value.

Back to the guarantees for a moment because it is the crucial component of a lifetime. There are three basic:

  1. A guaranteed return on cash
  2. A guaranteed cost that will not change and is locked when you buy
  3. A death benefit that is guaranteed to last your entire "whole life"

It There are many more details to discuss but can read more about all the more detailed aspects of life by clicking here.

Universal Life Insurance

One of the earliest descriptions I ever heard about universal life insurance was that it was "built on a term insurance chassis". Well, it sounds good but for most ordinary people (I was normal then) it does not do enough to define it exactly, so let's try to do better.

Universal life insurance is really a term insurance with a saving component. attached to it. Like all other types of life insurance, it is a raw cost to insure your life. In a general life policy, this is called the insurance cost and it is clearly reported to you. Basically, you have to pay enough premiums to cover the insurance costs to keep the death benefit you bought in effect.

But you also have other options to cover the costs. If the savings component has a cash value (there is that phrase again), the insurance costs or costs can be covered in full or in part by the cash value. Universal life insurance is very flexible in that there is really no fixed premium. You only have to cover the cost of insurance and maybe some other costs to keep the death benefit in effect.

Your cash value will have interest credited at least annually in most cases. How much and what the interest is based on is a completely different discussion and something we have other content that explains in more detail, you can check it out by going here.

Back to the basics of universal life: the concept of part of the policy works very much like an annual renewable term insurance because the cost increases a little every year. It starts very cheaply and goes up as you age. This can be a problem and has for some people.

But as you will read from us or hear from us repeatedly, this only becomes a problem when the policy is incorrectly designed, implemented and handled. Do not let this deter you from exploring the universal life. There is a lot of misinformation out there that scares people into ignoring it as an option.

Term Life Insurance

It does not take quite as much space to explain exactly the concept of life insurance to you. This is because term insurance is very simple.

Remember when you went to school and your teacher told you that you could not use the word itself to define the word in your vocabulary tests? Yes yes, I will break that rule because I'm not sure how else to do it in this case and this is our website so we can do what we want.

The term life insurance actually gets its name from the fact that it is life insurance purchased to cover you for a certain period or period. At the end of the term of office, your level, fixed and affordable premium are over and so is your coverage. seasons. There are other types of term insurance, but they largely disappear into the past and are no longer fully relevant. The other types reduce maturity and annual (or annual) renewal insurance.

The vast majority of life insurance policies sold today are level insurance (10, 15, 20 or periods of 30 years).

In most cases, the life insurance company at the end of the period will allow you to continue the same coverage but at a significantly increased cost. Here is an example:

This is a 20-year policy for a healthy 43-year-old with a death benefit of $ 1,000,000. You can see that the annual cost is guaranteed at $ 854 for 20 years. But when the insured turns 64, if he wants to keep the coverage in effect, the premium jumps to $ 29,050 per year. It is a very big hope.

To add another important detail not mentioned above with forward insurance … the cash value. This is because, unlike all life and universal life, term insurance has no cash value or savings. It is a pure insurance that is offered for a period at an affordable price which makes it a very popular option for those who need some coverage to reimburse their income if they die. [19659005] Let's put a bow on it

Each of the three main types of life insurance serves a unique purpose. Do not be tempted by offenders to feel that one is better or worse than another. 19659002] Universal life is infinitely flexible and can provide a better return on cash value over time if it is designed, executed and managed properly.

Time insurance is the group's tool player. It offers cheap death protection for those with a limited need. It works especially well for a primary breadwinner who has to make sure that their income is reimbursed for their family when they die.

All types work well and should be considered when buying a new life insurance policy. Choose the right one for your specific needs or desires. And if you want to discuss the purchase of a policy, please contact us, we are happy to discuss it with you and help you get the policy you need. In addition to being a resource for life insurance information, we are also agents and work with customers across the country.

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