Whether you have a spouse with children, a partner, or any other relative financially depending on you, having life insurance coverage can be crucial. Life insurance provides financial security for you and your loved ones and helps pay debts, living expenses, medical bills, and final expenses.
Choosing a life insurance policy that best suits your needs can be increasingly challenging, especially when the market is full of various options.
Although there are many options, two main life insurance categories are term life and permanent life insurance. While term life lasts only for a specific time, permanent life policies last throughout your life.
The right life insurance will depend on various factors like your circumstances, specific requirements, how much you can pay, and what type of coverage you need.
This guide will walk you through the life insurance policies that are commonly available so you can choose one that best meets your requirements.
5 Common Types of Life Insurance Policies
Listed below are the five most common life insurance policies you can choose from to protect your spouse, children, or other loved ones from potentially devastating financial losses if something happens to you.
Also called pure life insurance, Term life insurance coverage is one of the purest, cheapest, and simplest forms of life insurance.
You pay premiums for a specific time, ranging from 10 to 30 years. Your spouse and children (or any other designated beneficiary) will receive a payout (cash benefit) when you die within the specified term.
Although term-life coverage is cheaper than whole life and has low premiums, it doesn’t offer payouts if the set term expires or cash value, and only provides guaranteed death benefits.
Whether monthly payments, annuity, or a lump sum (one-time payment), you can choose how to receive the death benefit from the insurance company. Many people get it as a lump sum to prevent taxes.
Most term life coverage policies are level premiums, which means you pay a similar amount each month. However, the coverage ends when the policy term expires. You can renew your policy but at higher costs – life insurance costs increase as you age.
Also known as traditional life insurance, whole-life insurance coverage is one of the simplest forms of permanent life insurance policies that help protect your finances and family in the future.
This life insurance policy provides two key benefits:
- A tax-free death benefit is paid to designated beneficiaries, whether family or others when you die. Unlike term life coverage that covers a specific time, whole life coverage is meant to last till your death. However, you have to pay premiums.
- A wealth-building cash-value. It increases in time at a minimum guaranteed rate. Plus, you can withdraw or borrow money from the cash value to supplement various financial needs like facilitating estate planning or paying college tuition.
Also known as adjustable life insurance or UL, Universal life coverage is a type of permanent life insurance like whole life and will last until you die if you paid timely and up-to-date premiums.
This life insurance coverage also offers lifetime protection and tax-free cash value. However, unlike whole life, UL allows you to lower or raise premiums within specific limits.
If you continue to make minimal payments over time, it can adversely influence cash value growth and death benefit.
Besides lifelong protection, here are a few other UL insurance benefits:
- You can borrow or withdraw money from the cash value
- Flexible premium options
- The cash value component earns interest
- Adjust death benefit
Often called variable appreciable life insurance or variable universal life insurance, it is a permanent policy that provides flexibility and growth potential by investing all or some of the cash value in securities (subaccounts) tied to a stock market, like mutual funds.
Beyond lifelong protection, this life insurance policy offers cash value accounts and other benefits, such as:
- Supplemental retirement income
- Tax advantages
- Policy customization
- Improved growth potential
Sometimes called burial or funeral insurance, final expense coverage is a whole-life policy that pays medical and funeral costs when you pass away. This life insurance policy includes a death benefit that covers costs like a memorial or funeral service, casket, embalming, or cremation.
However, the beneficiaries can also use it for other purposes, such as using it to go on vacations or making property tax payments.
Here are a few features that the final expense policy offers:
- Whole-life insurance, provided you paid the premiums
- Cash value
- Fixed premiums if they’re paid
- Simplified issue insurance; no medical examination is required
- Easy process
- Affordable rates
- Fast approvals
Consult Our Expert Agents for the Best Life Insurance Policy
A life insurance policy is crucial for your family to meet ends. No matter the policy you choose, ensure to get it from a seasoned insurance company, such as John M Glover (JMG) Insurance agency.
We’re a go-to life insurance service provider, offering impeccable services since 1916. Consult our agents to discuss which life insurance policy best meets your needs.
For more information, visit our website or contact us directly!