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How do you know which life insurance you should purchase?

Friday, March 2nd, 2012

The concept of any type of life insurance is a common one- to provide benefits in case of death of the insurer. Though this basic aim is realized through any life insurance, the size of the benefits, the size of the premiums to be paid and the benefits of the policy vary from one insurance type to another. There are some basic types of insurance policies that differ in their terms, returns and in their benefits. Before choosing the life insurance that works for you, it is a good idea to examine all of them. This way, you will get an idea of which policy seems to fit into your budget and lifestyle.

What are the different types of life insurance available?

  • Term life insurance

This is one of the most popular options available to customers. By allowing individuals to choose shorter time periods for insuring and much better prices consequently, term life is bought by a large number of Americans. Here, the time period is first determined. Then the premiums are paid for that time period. The benefits of the policy are valid for that time period and expire upon lapse of the policy. The policy then has to be renewed for the next ‘term’. The renewed premiums may be at higher rates than before.

  • Whole life insurance

Whole life insurance gives benefits for the entire life span. Once the policy has been issued, the beneficiaries are entitled to its benefits at any time. The benefits are sizable and are usually significantly higher than the initial investment. The rates are fixed and do not fluctuate with market trends. Whole life is also referred to as permanent life insurance.

  • Universal life insurance

This form of insurance lies somewhere between term life insurance and whole life insurance. This means it offers greater flexibility than whole life but less than that of term life. Similarly, it is cheaper than whole life insurance but more expensive than term insurance. The flexibility arises from the fact that universal life insurance allows payments of premiums at the insurer’s discretion. He ‘manages’ his own portfolio.

  • Variable life insurance

Variable life insurance is a form of insurance that is actually permanent life insurance, but with an added investment dimension. This means there are investment options available in the form of sub-accounts that may fluctuate positively or negatively, thus influencing cash value of the total investment.

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