Types of Life Insurance

There are many different types of life insurance plans to choose from to meet your specific needs. Once you consider why you need life insurance and how much coverage you want, it’s time to answer the question, “Which policy is right for me?”

Let’s review a few common types of life insurance.

Term Life

Term life insurance is intended to cover you for a limited amount of time. This type of policy is best if you need coverage for a specific window of time and will only pay a death benefit in that term. If you want coverage that lasts for 10, 20, or 30 years to make sure your loved ones are taken care of until debts are paid or children graduate this could be a good fit for you. This coverage tends to be the most affordable but after the term expires, your coverage ends.

Whole Life

Whole life is considered a permanent life insurance policy because it does not set a specified term of coverage. As long as the premiums are paid, this coverage is guaranteed until the policyholder’s death. The premiums paid into a whole life policy go toward two components of the account. The first is the obvious insurance fund and the other goes into a savings component. Interest accumulates on a tax-deferred basis in this account, referred to as “Cash value.” The cash value component is considered a living benefit since it can be used by the policyholder during their lifetime for loans or withdrawls.

Universal Life

Universal life allows for adjustments to be made to the death benefit during the policyholder’s lifetime. This will in turn adjust the premiums to reflect that change. Regular whole life plans do not offer an adjustment and all rates are set when the contract is chosen. An additional benefit of universal life insurance is the ability to pay your premiums from the accumulated cash value portion of your insurance account. Essentially you can transfer your money within the account as long as you have enough accumulated. The cash value of a universal whole life account grows at a variable rate which is adjusted monthly.

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Final Expense

Final expense insurance is a smaller package policy, offering more modest death benefits often at a lower cost. This kind of policy is a good option for those who have had trouble qualifying for regular life insurance policies because of medical conditions. In some cases no medical exam is required for final expense insurance. It is typically marketed toward older individuals who want to unburden their loved ones from costly funeral arrangements. While the death benefit is intended to cover burial costs, the beneficiaries may use the payout however they see fit.

There are many other life insurance policies available and even different options within each of the above categories. Many plans are customizable and can be tailored to suit the needs of your family. Call American Family Solutions today to find out which policy is perfect for you and your needs.