Types of Life Insurance

Ashley Thomas, Licensed Insurance Agent. 02/27/2023.

Life Insurance

In the article, What The Heck Is Life Insurance?, I gave a brief synopsis of the meaning of life insurance. To recap, life insurance is a contract between an individual or legal entity with an insurance company. The insurance company agrees to pay a certain amount to the beneficiary if the insured dies. In exchange the policy owner pays a premium to the insurance company. In this article, I will define a few of the different types of policies under the life insurance umbrella.

Term Life Policy

Term insurance covers an insured individual for a specified term. Terms can be 10, 20, and up to 30 years. During this time the policy owner pays a premium that is less expensive than most other policies. At the end of the term the insured coverage ends, Term policies are least expensive because the insured is only covered for the length of the term. If the insured does die within the term the insurance company, then pays out the agreed upon death amount.

Whole Life Policy

Whole life insurance is a permanent policy that covers the insured throughout their entire life. These policies not only provide a death benefit when the insured passes, but also a cash benefit that can be used by the policy owner and/or the insured depending on how the policy is set up. Whole life policies generally cost more than term policies.

Indexed Universal Life Policy

Indexed universal life policy is a type of whole life policy. Many people use this product as an investment or savings tool. It can be an attractive option for some consumers due to the way it cash value is set up. This can also be a risky product unlike a traditional whole life policy that is backed by a fixed interest rate, IULs cash component is attached to the stock markets index performance.

Choosing The Right Policy

The best choice is solely based on your circumstances and what purpose you want your policy to serve. Purchasing life insurance is a big decision, contact a licensed agent to navigate the process with you.

Check out the printable pdf of The Four Step Formula in the digital products tab of the website to help with your journey to protecting your family’s financial future.