Types of Life Insurance
Life insurance is broken down into different types of policies. In fact, there are various life insurance hybrids offered by insurance companies across the United States. However, in this blog we will focus on the core insurance policies that are readily available across the country.
Types of Life Insurance Covers
- Term life insurance
- Variable life insurance
- Whole life insurance
- Guaranteed universal life insurance
- Equity indexed life insurance
- Simplified Issue life insurance
- Accidental death insurance
It would be futile to go shopping for the perfect life insurance as one does not exist. The best life insurance plan is a bespoke cover that puts individual circumstances into consideration.
Before we delve deeper into the different types of policies, there are a number of terms we need to define:
Policy – This term refers to a legal contract between the customer and the insurance company. It stipulates all the terms of the agreement between the two as well as other parties that might be included in the contract.
Insured – This refers to the person whose life is covered by the insurance policy.
Owner – Refers to the person getting into agreement with the insurance company for the life policy.
Insurer – This is the insurance company that is providing the cover to the insured. The insurer may also be referred to as the company, provider, or carrier.
Death Benefit – This refers to the amount of money that is paid out as a lump sum to the beneficiary when the insured dies. There are other alternatives to the lump sum that include annual payments, or monthly payments.
Term Life Insurance
This type of insurance cover offers protection for a specified amount of time that might be between 10 -30 years. The “specified time” is what’s known as the term of the policy. However, you should know that when a term life insurance renews the premiums usually increase sometimes by as much as 300%.
Variable Universal Life Insurance
This insurance cover is a bit complicated. The face value of the VUL fluctuates based on the value of the securities or the US Dollar. Its value might also fluctuate based on the value of other equity products. It is a perfect investment vehicle when the economic outlook is great however when there’s an economic downturn, the insured might find it difficult to keep up with the premiums.
Whole Life Insurance
This insurance cover provides a death protection benefit for as long as you live. Basically, it offers guaranteed fixed premiums, guaranteed protection, and guaranteed cash value accumulation. Due to the length of this policy, it costs more than other life insurance policies.
Guaranteed Universal Life Insurance
Anyone within the age bracket qualifies for this cover. Most insurance guaranteed universal insurance covers only provide a death benefit if they have been in place for more than two years and only if the insured dies of natural causes.
Equity Indexed Life Insurance
Even though they might not be right for everyone, IULs are a perfect option for others. They provide guaranteed minimum returns, cash value accumulation, and protection from market downturns.
Simplified Issue Life Insurance
You’ll find that getting a simplified issue life insurance is much quicker than other types of life insurance policies as they require less underwriting. Under this policy you are not required to take a medical exam but you should expect to answer health related questions which are used to determine your overall health.
Accidental Death Insurance
Under this policy, the insurance company will pay benefits to the insured’s beneficiaries in the event that the insured’s death is caused by an accident.