Do You Understand The Different Types Of Life Insurance?
If you are thinking about protecting your loved ones, in the event of an accident, you might start looking at the different types of life insurance and find them confusing. Not all policies are identical and it is important to know the differences. You will hear about term life, which is taken out to cover a specific term and it is the least expensive, but gathers no cash value. Whole life covers you for life, as long as you pay your fixed premiums and it builds cash value you can borrow against. They both pay a death benefit to your beneficiaries, if you die while they are in force.
When you are considering different types of life insurance for retirement goals, you might hear about variable life, universal life or universal variable life. These are different types of life insurance that build a cash value account and it can be borrowed against, but there is no guarantee of the cash value, if it is put in risky investments. It provides more flexibility and pays a death benefit. Universal variable life is one of the most popular types of life insurance for the investor that wants a separate account to invest in stocks or bonds, yet it offers premium flexibility and still pays the death benefit to your loved ones.
There are usually different motivations for purchasing these different types of life insurance. For example, term life is the perfect policy to ensure certain items are paid off, in the event of your death because they are for a certain time limit and the premiums are the lowest of all. If you have a mortgage of $100,000 with 10 years left to pay, you can take out a $100,000 term life policy for ten years and your home will be paid off, in the event of your death, but at the end of the term, there is no cash value.
With a whole life policy, it is one of the permanent types of life insurance that builds cash value, pays your beneficiaries and has a fixed premium that doesn't change. You don't get the investment account capability, but for most people, this is a traditional policy where the dividends can be reinvested and they go towards paying your premiums. There are some people that prefer to invest their dividends in stocks or money markets and that is the primary reason that the variable and universal life insurance policies have become more popular.
When you are analyzing the different types of life insurance, it is possible you need a combination of policies to protect your family and keep them from financial ruin, after your death. The more debt you have, the more important this aspect can be. This is especially true of those that have a home mortgage because you would hate to think of your loved ones losing the family home, if you are the primary breadwinner. You can find affordable premiums if you consider the online options for the different types of life insurance, so there is no reason to be left unprotected.
