Getting life insurance is important, we all know that, but what types of life insurances should one go for. Knowledge is power, and without the basic information, you could lead yourself or your loved ones to a heavy financial loss.
In this article, we will cover all the different types of life insurances.
Read more: Types of Insurance Policies You Need
Term Life Insurance
The first and most affordable in types of life insurance is term insurance. Term insurance is also called terminating insurance which means it will be terminated after a specific age or time. Most term insurances last about 10 to 15 years.
The question is whether you should opt for this insurance or not. It depends upon the reason you are planning your insurance. If your end goal is to save money, then term insurance is the perfect policy for you, but if you are old and leave death benefits for your loved ones, term insurance is not the policy we recommend.
Let’s dig deep into this policy and understand why it is suitable for some people and not for others. First, term insurance is not a long-lasting policy, so for people who only want a short-term return on their investment, it is the best policy.
Those who need insurance to cover the cost of their funeral or for death benefits should never go with term life insurance, because death is uncertain, and taking a risk with term insurance is not what the experts advice.
Whole Life Insurance
Whole life insurance is opposite to term insurance. It is also known as Permanent Insurance. This means it will not be terminated as long as you are paying your premiums. Whole life insurances are often used by seniors to cover the cost of their funeral.
So, should you be choosing whole life insurance or not. Again, it depends upon the type of result you are expecting. If you need insurance to accumulate enough wealth to enjoy the years of retirement, then whole life insurance is not for you, but if you want to ease the life of your loved ones after you die, then you should go for whole life insurance.
Universal Life Insurance
Universal Life Insurance comes with heavy death benefits but little no cash value. If you care for the lives of your loved ones more than yourself then, Universal life insurance is for you. But if you do not have a beneficiary, then do not fall into this trap. Many insurance agents will try to persuade you with fancy words or emotional tactics, but be vigilant, only choose this insurance if you think you are the right person for it.
There are further two more types of universal life insurance policies.
- Indexed Universal Life Insurance: The cash value in this policy works with the stock market. It is directly proportional to stocks. But death benefits and cost of premiums remain flexible. Even if you fail to pay your premiums on time, the profit you earned from the stocks will cover that premium, but if you do not have an extra cost or profit, your policy will be terminated.
- Variable Universal Life Insurance: Premiums in variable universal life insurance are adjustable and the death benefits may increase or decrease at any time, depending upon the bonds and mutual funds you have invested in. The cash value can change at any time based on how the market reacts daily.
- Insurance by Underwriting
Underwriters decide the amount of coverage you get. The cost of premiums depends on the type of plan you qualify for. Let’s dig into the types of insurances by underwriting.
- Fully Underwritten Policy: This is the cheapest policy you can get but the qualification criteria are tough. Underwriters make sure you go through a medical exam. They also check your family’s health history.
- Simplified Issued Policy: This policy involves a quick medical questionnaire. The policy is based on your answers. Misleading information may disqualify you for this policy. Other than that, the qualification for this policy is much easier than a fully underwritten policy.
- Guaranteed Issued Policy: This is a risky policy and for those who are normally not eligible for the first two policies. Coverage is guaranteed no matter how sick you are, however, there is an age limit, which is 40-85 years. Moreover, if you die in the first two years with a natural cause, you will not be covered. After two years, you will be covered no matter how sick or old you get.
Burial Life Insurance
Burial life insurance covers the cost of your funeral and provides death benefits to your beneficiary. There are many types of burial but two of them are mostly used, Term and whole life insurance. We recommend you going with whole life insurance because it has fixed premiums, never cancels, and provides hefty death benefits.
Burial insurance is a good way to take care of your loved ones. The cost of a funeral is increasing day by day. Your family may not be able to cover the cost of your funeral, so why to take such a risk. Why burdened them when you can take care of yourself.
Group Life Insurance
Group life insurance is offered by companies to their employees. Employees are offered insurances, such as for medical bills, mortgages, credit payments, and so on with the destruction of a small amount from their salaries as monthly premiums. These insurances are often for government employees, but some provide companies provide them as well.
Credit Life Insurance
When you take out a loan from a bank, it usually offers you a credit life insurance, to pay the balance of the loan you have taken. It might seem useless at the time but could be a lot useful in the future. Let me explain how. If you die before paying off your debt, the bank will forgive the debt.
Joint Life Insurance
Joint life insurance does not work like a normal policy. Two people are insured at the same time. These policies are not in demand. When the first person dies, the policies expire and does not continue to cover the second person. People who are unable to afford normal insurance often use these policies.
Mortgage Life Insurance
Like credit policy, mortgage policy covers the cost of your mortgage. In case you die, the insurance company will give the rest of the payment, not your family. These insurances are quite common because they reduce the risk factor. The premiums in these policies are expensive, so you need to make sure if you can afford such this policy before digging into it.
Accidental Death Insurance
Accidental death insurance, as indicated by the name, covers the cost of your funeral or medical bills if you die in an accident. This policy is a bit similar to the guaranteed issued policy. It also pays for broken bones, loss of eye-sight or hearing etc.