Life insurance can come in various forms and different types, each with its unique benefits and drawbacks. Understanding the differences between these types of coverage can help you decide which might be best for your family.
There are actually a variety of different types of life insurance, each with its own unique features. Understanding their differences and how they can benefit you and your family can help you decide which kind is right for you.
If you’ve spent any time on the internet, you’ve probably seen a blog post about insurance. And you might be thinking about getting a life insurance policy for the first time. But how can you choose the right kind of life insurance? Do you need whole life insurance? Term insurance? How about variable life insurance? If you’ve spent any time on the internet, you’ve probably seen a blog post about insurance. And you might be thinking about getting a life insurance policy for the first time. You see, there are so many different types of life insurance. And it can be confusing to understand them all. But don’t worry! In this article, we’ll explain all the different life insurance types. We’ll also look at the benefits and drawbacks of each type.
What is life insurance?
Simply put, life insurance is a contract you sign with the insurance company as a beneficiary, promising to make a payment to the insurance company in the event of your death. You promise to pay the regular premiums until the coverage ends, at which point the insurance company can collect the full death benefit or face a penalty for early cancellation.
If you die during the term of the policy, the beneficiaries you named in the contract will get the full death benefit. If you die during the term of the policy, the insurance company can cancel the contract, receiving back the premiums they paid out.
People get life insurance mainly to provide financial protection in case of death. The death benefit is the main benefit of a life insurance policy. The death benefit amount will vary depending on the type of policy you select and your insurance company.
- Whole Life Insurance
Do you hate spending money? Even if you have to write a check every month to keep your policy going, you’re happier knowing you’re financially secure. That’s the idea behind whole life insurance.
There are only two types of people in this world: those who love their whole life and those who don’t. If you don’t fall into either of those categories, then this section is for you.
Whole life insurance is the most expensive type of coverage and the only one that isn’t based on the beneficiary’s term. Instead, it’s based on the entire life of the insured person.
- Term Life Insurance
Term life insurance is what it sounds like: it’s a term policy that lasts for a specified period of time. Most companies will only offer you a 20-year term, but some will offer you shorter terms.
It’s important to note that the longer your term life insurance policy, the more it will cost. Therefore, if you want the most coverage for your buck, a 20-year term policy is the way to go.
Variable Life Insurance
Variable life insurance is what it sounds like: it’s a contract you sign with a company that provides you with a fixed amount of coverage without giving you a lot of flexibility.
For example, your premium payment could stay the same every month for the entire term of the policy, but the death benefit could increase annually. Or, you could choose a contract where the premium stays the same, but the death benefit decreases each year after the first few years.
- Universal Life Insurance
Universal life insurance is the most popular type of life insurance. It provides you with the most coverage for the least amount of money.
That’s why it’s also known as the poor man’s insurance. What’s great about it is that you can usually get a lot of coverage for a low price.
Discretionary Life Insurance
Discretionary life insurance is what it sounds like: it’s insurance that you can choose to take out when you want and how much you want.
If you have kids in college or a child on your hockey team that you want to support, you can simply take out a larger policy without having to explain why.
How Much Insurance Do I Need?
This is probably the most confusing type of life insurance to explain. So, here’s a quick refresher:
You need life insurance if you want to protect your family from financial loss in the event of your death.
Depending on your age, health, and other factors, you could require as little as $30,000 in coverage or as much as $2 million or more.
However, the amount you need will vary depending on your specific situation. So, if you want to know how much life insurance to get, you’ll have to do some research and crunch some numbers.
When Should You Buy Insurance?
There are a few times during your life when it makes sense to buy life insurance:
If you have a new baby or a child on the way, this is one of the best times to get life insurance if you haven’t yet saved for your college education. You could buy term coverage for your spouse or partner and add your new baby to the policy as the secondary beneficiary. This way, your family will be financially secure if you die during the term of the policy.
If you have a high-risk occupation: if you’re in a high-risk line of work, such as a police officer, soldier, or firefighter, you should consider getting whole life insurance. The reason is that whole life insurance is the only type of insurance that protects you from financial ruin by giving you a guaranteed death benefit.
If you’re in your 30s or 40s and have a family: if you have kids in college or a child on your hockey team that you want to support, you can simply take out a larger policy without having to explain why.
Buying Life Insurance – the Basics
There are a few things you need to remember when you’re buying life insurance:
Find a life insurance broker: life insurance is primarily a product sold by brokers, and you’ll get a better deal buying coverage through one than buying directly from an insurance company. Find a broker that specializes in life insurance and run your numbers by them to see what they can give you for your budget and risk factor.
Shop around: Different companies offer different rates and premiums for insurance coverage. And since each company has different underwriting standards, you need to make sure you get a policy that’s right for you.
Check your contract: make sure you understand the terms and conditions of your life insurance policy before you sign. Make sure you know how much coverage you have, how much it costs, and what happens if you die during the term of the policy.
Final Words – Should You Buy Life Insurance?
This is a question only you can answer.
After all, everyone’s situation is different, and no two people will ever require the same amount of life insurance. That’s why it’s important to do your research and shop around to find the best deal.
Once you understand the different types of life insurance and how they benefit your family, you can decide whether or not to buy the coverage.