When you are shopping around for a life insurance policy, you will likely come across different types of policies that have varied benefits, pricing, and drawbacks. If you aren’t familiar with life insurance, you may have a tough time deciding which policy you should buy. So, to help you pick the right policy, we’ll explain the common types of life insurance policies.
Term life insurance
Term life insurance offers coverage for a predetermined period of time, usually ranging between 5 and 30 years. Once the term of the policy is up, your coverage ends. Term life insurance has become a popular choice for policy buyers since it offers coverage at an affordable premium.
Whole life insurance
Whole life insurance is a type of permanent life insurance policy. The coverage amount and the premium is set at the time of purchasing the policy and remains the same throughout the policy tenure. Additionally, whole life insurance policies accumulate a cash value over the course of the policy term, due to which this type of policy is more expensive than a term insurance policy.
Universal life insurance
Like whole life insurance, universal life insurance policies offer permanent life insurance coverage to policyholders. It also accumulates cash value over time. However, policyholders are allowed to adjust their premium payments every year. Keep in mind, you will likely need to pay a certain minimum premium every month to keep your insurance coverage running.
Variable universal life insurance
Variable universal life insurance offers lifetime coverage. The policyholder is also given the option to choose which investment accounts their premiums are to be allocated to. This policy is usually more expensive, since the cost of the insurance coverage, trading cost, etc., is added to the premium. Keep in mind that variable universal life insurance is a good option for people who are open to risk and volatility.
While buying a life insurance policy can become complicated, remember that doing a little research in advance will help you pick a suitable policy with optimum coverage. If you are still unsure, you may want to speak to an independent insurance agent or financial advisor about which policy would work best for you.