There are several different types of life insurance policies, each tailor made for a different purpose. You can take these policies based on what you need and what you can afford. The most important classification of life insurance policies is term life insurance and whole life insurance. As the name suggests, term life insurance policy has a fixed time frame. You will receive death benefits coverage only within that particular time frame. Once the time has expired, the policy is null and void and you don’t stand to gain anything. Usually term life insurance is purchased to guard against unforeseen events. For example, if you have your child’s education to plan for or you have a house mortgage to repay, then you can take this insurance to make sure that your accidental death, doesn’t put a huge burden on your family.
Whole life insurance on the other hand offers the benefit of death coverage, over your entire lifetime. This is an insurance policy that is quite important to have in case you have dependents. Whole life insurance is obviously more expensive than term life insurance, but most policies have an investment or cash value component available as well. In other words, the premium you pay for whole life insurance is more like an investment and you are likely to get your money back sooner or later unlike in case of term life insurance. Whole life insurance is a type of permanent life insurance where the premium remains constant even as the time progresses. This is considered a safe option because premiums tend to be lower when you are young and healthy and go up as you age.
There is universal life insurance too, where the premiums are not constant and you, as the policy holder can determine what the premiums should be. Accordingly the death benefits received from the policy will also change as you go along. This flexibility is what a lot of people seek when they are not sure about the income levels and how much they will be able to invest in the policy. There is also variable life insurance where, the policy holders can have a say in the investment component of the policy. You can decide whether the investment has to go to bonds, with safer but lesser returns or stock, with more volatility but with a chance of higher returns.
There are several other types of insurance too like the joint life insurance which are usually taken by couples for their children and the death benefits are received after the first person dies. The survivorship life insurance works slightly differently with death benefits being paid out only after the death of the second person. There are life insurance policies which are convertible at the end of their term and those which don’t need a medical exam for qualification. The premiums of these policies also vary based on the terms and conditions and you have to check what suits you best, before applying for a particular policy.
