You Should Be Aware Of the Various Types Of Life Insurance Policies Availability
The main aim for buying life insurance is to help reduce the potential financial burden on your loved ones when the unthinkable happens to you. However, with different life insurance policy, not all are created equally. While some are meant to make sure your spouse can continue paying the bills if you die unexpectedly, some policies are simply designed to cover your own funeral costs. Therefore, choosing the best type of life insurance from pure cover will ultimately depend on your budget and needs. In this article, we seek to look at the common Types of Life Insurance Policies.
Basic features of a life insurance policy
Life insurance policy is basically a promise that accompanies vows to offer financial protection to your loved ones when you are dead. There are a few key factors that define the way in which a policy carries out that promise. Below are the basic key features of a life insurance policy;
- The premium – The periodic (yearly or monthly) payments the insured need to make in order to keep the policy up and running.
- The cash value – This refers to the investment component of the policy that builds over time. The cash value can be borrowed against or cashed out in the long run.
- The benefit: Death benefits are the total amount of money (income-tax free) the insurance company will pay upon the death of the insured person.
- The beneficiary: This refers to the person or group of people designed to receive the death benefit. It can all go to a surviving spouse or can be divided among the spouse and two adult children. Nb: beneficiary doesn’t have to be a blood relative
- The policy length: The period of time that the insurance company agrees to pay the benefit.
Types of life insurance policies
When considering life insurance, it’s essential to understand the various types of policies available. Two primary categories of life insurance are term and permanent insurance. Term life insurance provides coverage for a specified period, while permanent life insurance ensures coverage for the insured’s lifetime. Let’s delve deeper into the different types of life insurance policies and their features.
Whole Life Insurance
Whole life insurance, also known as permanent life insurance or cash value life insurance, provides coverage for the insured’s lifetime as long as premium payments are made. It accumulates cash value over time, which can be accessed under certain conditions. Whole life insurance premiums are generally higher than those of term life insurance due to the added cash value and lifelong coverage it offers. This policy is suitable for individuals seeking long-term financial protection and potential savings growth.
Universal Life Insurance
Universal life insurance offers more flexibility than other forms of life insurance. It combines a death benefit with a savings component that accumulates cash value over time. Policyholders can adjust their premium payments and death benefit amounts, providing greater flexibility in response to changing financial circumstances. This type of policy is ideal for individuals who desire lifelong coverage with the ability to customize their insurance plan.
Term Life Insurance
Term life insurance offers coverage for a set timeframe, typically ranging from 10 to 30 years. It is a straightforward and affordable option that replaces income or pays off debts in the event of the insured’s death during the policy term. Term life insurance does not accumulate cash value, but some policies may include a “return of premium” feature. This policy is often chosen by individuals with temporary financial obligations or those seeking affordable coverage.
Variable Life Insurance
Variable life insurance is a permanent life insurance policy that allows policyholders to allocate a portion of their premiums to a variety of investment options, such as stocks, bonds, or mutual funds. The cash value of the policy varies depending on the performance of these investments, making it a riskier option. This policy is suitable for individuals comfortable with investment risk and seeking potential market-related returns.
Non-Traditional Life Insurance
Non-traditional life insurance includes policies such as simplified issue and guaranteed issue. Simplified issue policies do not require a medical exam, making them a quicker and easier option to obtain coverage. Guaranteed issue policies are designed for individuals who may have difficulty obtaining coverage due to health conditions. These policies provide coverage without the need for a medical exam but may have limitations on the death benefit and higher premiums.
Choosing the right life insurance policy depends on individual financial goals and priorities. Term life insurance provides affordable coverage for a specific period, while permanent life insurance ensures coverage for the insured’s lifetime and may accumulate cash value. Within permanent life insurance, options like whole life insurance, universal life insurance, and variable life insurance offer different features and benefits. Non-traditional life insurance policies provide alternatives for individuals with specific circumstances. Understanding the various types of life insurance policies offered by pure cover can empower you to make informed decisions and secure financial protection for you and your loved ones.