The Main Types of Life Insurance: A Basic Guide

Life insurance is a smart way to protect yourself and your family and to bring you peace of mind.

With so many different types of life insurance policies available, how do you know which one is right for you?

Read on to learn more about your life insurance options to help you decide which one will serve your unique needs.

Types of Life Insurance: Term

Term life insurance is usually sold in various numbers of years that can range from as little as five to as many as 30. The amount of coverage you receive may vary, but it can go as high as the millions in some cases.

When you’re looking for the best life insurance, ask about “level premium” term life insurance. This will lock your monthly price in for the entire life of the policy, so you don’t have to worry about rate increases.

Annual renewable term life insurance is good for one year, then it renews annually. This may be ideal if you just need coverage for a much shorter period of time.

You can get term life quotes online and this type tends to be the most affordable. However, if you happen to outlive the policy, your beneficiaries will not receive any money (or payout).

Whole Life Insurance

When exploring your life insurance options, consider whole life as another possible choice. This type of life insurance usually lasts until your death if you continue to make the monthly premiums.

In most cases, your monthly cost should remain the same and you’ll get a guaranteed return on the cash value. The death benefit amount should also remain the same unless you choose to increase or decrease it.

You can ask about a MEC or Modified Endowment Contract which is a bit different from a standard whole life policy. Either way, this type is usually more expensive than term life insurance, but it builds cash value and covers you for life.

Guaranteed Universal Life Insurance

If you want something guaranteed when getting life insurance, consider a universal plan. The death benefit is guaranteed, and your premiums should stay the same.

You can also choose the age when you want the death benefit guaranteed, whether it’s age 80 or 100, for example. This type of policy has a minimum cash value and is cheaper than whole life insurance.

If you miss a payment, however, you run the risk of forfeiting the entire policy. Without cash value attached, you could end up losing money if you’re not careful. 

Make Sure You’re Covered

From whole and term to universal and more, be sure to research the different types of life insurance available before you make a decision. Choosing the right type of policy will give you peace of mind and ensure that your loved ones have the financial resources they need in the event of your death.

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