Investors will always advise purchasing any kind of life insurance. If you don’t know what this is, then we will explain it to you in the simplest way possible.
Life insurance is nothing but a written agreement between yourself and an insurance company where both exchange something. You pay premiums each month for the duration of the agreement, policy, and the company secures you in the case of any emergency or death by paying you the total amount of which the policy is worth.
These are various types of insurances, each one structured differently, and each one providing the beneficiaries with different things. The industry is very popular and millions of Americans are life insured.
In this article, we are going to talk about the different types out there, what each one means, and what are the key differences between all of them. There has never been a better time to get yourself familiar with the different types, and this is the place to do it.
With all that said, let’s start.
The first one we will talk about is term life, and this is rather expensive compared to the others. But being this expensive means the beneficiaries get larger sums of money in return if the insurer dies.
Term life typically lasts for a specific period, usually up to twenty (20) years. This means that if the policy ends and something would happen to you, then the policy would not take effect and your beneficiaries would not receive the final amount.
Luckily for you, term life can be upgraded to whole life, which can be rather expensive if upgrading from one to another. But, whole life ensures you throughout your life.
As we mentioned, term life can be rather expensive. This is especially the case if you’re buying it from a younger age as opposed to older.
Term life further branches out into two categories. These are group term and supplemental, and both are very different from one another. The former is typically used for companies to ensure their employees, but they usually come at the cost of the employees’ paycheck. The latter ensures you in the case of an accidental death, or burial insurance.
The name of this one is pretty much self-explanatory. Permanent life is a type of insurance that ensures you throughout your life from the moment you start the coverage.
You pay premiums on monthly, quarterly, or yearly bases throughout the coverage, and the coverage doesn’t stop until you die.
These are the basics that every individual needs to know about permanent life. One more thing, permanent life further branches into multiple categories such as universal life and whole life, amongst others. Additionally, if you find you no longer need your life insurance as you get older, you can sell a permanent life policy through a process called a life settlement, click here to learn more.
So far we know that this policy can be upgraded from the term life policy, but you can also go straight to it without even needing to upgrade.
But what makes whole life so different than the rest? Well, for starters, the few things that separate whole life with the rest is the fact that payment costs are locked from the time of purchase.
This means that you won’t pay a single dime more or less in the future and the payment will remain the same throughout the coverage.
Another thing regarding whole life is closely tied to your age and health. Namely, the healthier you are and the younger you are makes a significant difference when determining the premium costs. This is precisely why millions of Americans get this coverage from a younger age.
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Like with every other type of insurance, universal life differs from the rest in multiple things.
For starters, universal life doesn’t differ from the fact that it provides coverage throughout your life. What makes it different is the flexibility.
Universal life is probably the most flexible type of life insurance out there. It’s more flexible than whole life because you can choose the premium payments.
Changing the premium payments will, however, affect the amount of money your beneficiaries will inherit when you pass over. Depending on the monthly payment, the amount of money at the end can either increase or decrease from the standard sum offered.
Another reason why universal life is so flexible is the fact that you choose the amount and when you pay that amount, so long as the first payment is made. This means that for one month you could pay the agreed sum, and pay less the next.
Universal life is all about investing in the future, and that’s why it’s so popular with millions of Americans. It’s a nice way to leave something behind for your children and grandchildren.
One last thing regarding this insurance is that you can also purchase a variation called indexed universal life. Indexed insurance effectively divides your payments into multiple low-risk accounts. This means that a portion of each payment goes into your savings account, while another portion can be used for on the stock market.
And the best thing is that you dictate the amount of money that goes into either.
Joint survivorship is usually taken by couples where both individuals share the same policy.
This life insurance has two policies; first-to-die and second-to-die.
The former is activated when either of the two individuals dies, while the latter can be activated when both die. In the case of the former, whenever one of the individuals dies, the policy pays out to the other individual or any other beneficiaries.
Logic dictates that the policy pays out whenever both individuals die when signing for a second-to-die policy.
The thing you should know about variable life is the fact that the majority of the payments can be invested in multiple subaccounts. As you would imagine, these accounts can either grow or shrink as the investment funds in these subaccounts grow or shrink.
This makes it quite risky, especially if you have no prior knowledge of investing. The risk involved makes variable life not that popular.
These are some of the most popular life insurance policies that you can take to insure yourself. Most of these policies end whenever you die, and the policy pays out to your beneficiaries.