What are the different types of life insurance?

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So, you are thinking about taking out a life insurance policy, but you aren’t sure which is the best type for your situation and lifestyle? Understanding the differences between various types of life insurance policies and what each one offers is important. Knowing this information will help ensure that you take out a policy that is best suited to address your needs.

Term vs. Whole Life Insurance

Life insurance policies can be divided into two main types – Term Life Insurance and Whole Life Insurance. When deciding which one is the right policy for you, it is important to consider the payout amount that you want for your beneficiaries and how long you want the protection to last.

In a Term Life Insurance policy, the protection lasts for a set term with common terms being 10, 20, or 30 years. If the insured passes away at some point during the term, the insurer will pay the beneficiaries included in the policy a sum of money. Once the term ends, however, the policy ends and so does the protection. This type of life insurance is usually simpler and cheaper than a Whole Life Insurance policy.

With Whole Life Insurance, the policy remains active during the entire extent of the insured’s life if the premiums are paid and the policy is not surrendered. When the insured passes away, the insurer will provide a payout to the named beneficiaries of the policy.

Different Types of Term Life Insurance

There are essentially three different types of Term Life Insurance policies including Level Term, Decreasing Term, and Increasing Term. These three different types of policies differ according to the monthly cost of the premium that the policy holder pays over the term. 

In a Level Term Life Insurance policy, the premiums that the policy holders pays remain constant throughout the life of the policy. This is because the coverage provided by the insurance remains constant throughout the term.

With a Decreasing Term Life Insurance policy, the premiums paid will decrease with time. The protection provided by the policy will decrease as you get older which reflects the gradual decrease of the premium amount. 

Lastly, in an Increasing Term Life Insurance policy, the policy holder will pay a premium where the amount will increase as the insured gets older. Therefore, the coverage provided by the policy increases over time. 

Each life insurance policy offers different variations of coverage, so knowing how each one would fit with your lifestyle can help you decide which policy is the best for you.