When you are purchasing a life insurance policy, there are quite a few choices that you have to make. You will need to pick the choice that suits your condition the most. Different types of policies are made for different scenarios which is why you need to pick the policy that gives you the best coverage with the lowest premium. To start with, you have to choose between term life and permanent life insurance. The term life insurance has a lower premium and is ideal for scenarios, where the risk is during a particular time frame, where you have to repay a loan, a house mortgage or pay for the higher education of children. The permanent life insurance on the other hand is when you don’t have any pressing obligations but would want to leave something back for your dependents.
Permanent life insurance has an investment component which is not provided for term life insurance. This is also the reason why this kind of insurance provides tax benefits and can be used to draw up a loan against the accumulated cash value. Most importantly, you are not worried about the prospect of paying premiums that amount to nothing at the end of the policy term as is the case with term life insurance.
If you choose the whole life insurance policy, you will have some more choices to make. For example, you can choose between universal life insurance and variable universal life insurance. In universal life insurance, you have the flexibility to vary the amounts of the death benefits you are entitled to receive and the premiums that you have to pay. In variable universal life insurance, you get even more flexibility. In this case, you can even control what happens to the investment component of the universal life insurance. So, you can choose whether your investment component or cash value is invested in stocks, bonds or other financial instruments. This is ideal for those who have a good idea about financial markets and how to get the best possible returns and would like to do it themselves.
One can also choose between survivorship and joint life insurance, two policies which can be taken by a couple with joint loan or the obligation to provide for their children’s education. In the joint life insurance, the death benefits are available at the death of the first person itself. On the other hand, in case of survivorship life insurance, the death benefits are available for independents only after the death of the second person. Similarly, you can choose between level term and decreasing term life insurance policies. In level term policies, the death benefits remain constant throughout the time frame with the risk of increasing premiums. In case of decreasing term policies, the premiums stay constant, while the death benefits keep decreasing as you near the end of the policy. This depends on your comfort level with the premiums and the death benefits that you want for your dependents during the term of the policy.