On the surface, life insurance seems pretty simple. It’s a form of insurance that financially secures a family after a loved one’s passing. Policyholders are also able to sell their life insurance for a certain percentage of the overall value of the policy. However, there are multiple types of this insurance that not everyone may not be aware of. Here are four types of life insurance you should know about.
Whole Life Insurance
Whole life insurance is the most commonly purchased type of policy. The policy is active until you or another policyholder unfortunately die. As you continue to pay off the premiums, the policy’s value increases over time. But what sets this apart from the other types of life insurance is that the premiums and death benefit do not change, so you won’t have to worry about a sudden increase in payment. Your premiums will be determined by a set of requirements including how you fare in a medical examination. A lower premium as a result of a good exam is one of the unexpected advantages of living healthier in your daily life. While whole life insurance is typically more expensive, it’s well worth the price.
Term Life Insurance
Term life insurance is the opposite of a whole policy. Instead of being covered for your entire life, you choose a timeframe, which can go up to 30 years, and you pay it during the allotted time. The coverage works somewhat similarly, but with a slight twist. Hypothetically speaking, if you outlive the term of your policy, but die shortly afterwards, the death benefit is not received. However, if you sell the policy while it’s still active or die during it, payout is awarded. Another thing you need to know is that the payout is different as well. For starters, the overall value decreases as time goes on. It may be a cheaper option with the potential to be valued in the millions, but you need to be in a really specific scenario to get money after a loved one passes.
Universal Life Insurance
A universal policy is a form of insurance that guarantees a death benefit along with never changing premiums. It’s also considerably cheaper than term insurance due to having one of the lowest cash values on a policy. These sound like the ideal policy that everyone should have, right? It would be if not for the fact that they’re really strict when it comes to payment. Even missing a single payment can potentially mean you surrender the policy. And with how low the cash value is, you’ll most likely not have anything to show for it. You also have to choose the age of when it’s possible to receive the death benefit, like 80 to 100. You really need to think this option through to the last detail before purchasing it.
Indexed Universal Insurance
The cash value of this policy is determined by the amount of stocks it’s linked to. The number of gains you’re eligible for is a part of a formula, which is in the policy’s details. There are a few benefits of this insurance. The first one is that you have complete access to the cash value at any time. The second benefit is the policy’s value goes up with the stock value, which can significantly increase your gains. The third and last one is that it’s possible to make your payments and death benefit flexible, but this depends on the company. However, unlike the previous three policies, this one is a massive responsibility. You constantly have to monitor the stock you linked it to and make sure nothing goes awry. You also have to deal with investment caps, which means you’re only entitled to a certain percentage of gains. So, if your stock goes up by 40 percent, and your cap is set to 20, you’re only allowed to have 20 percent.
