Insurance guide: Types Of Life Insurance

Insurance guide: Types Of Life Insurance

Want to know more about life insurance before getting coverage? Then you've come to the right place. In this article, you'll learn the gist of life insurance, who it's for, how it works, and its many types.

Before getting any insurance, it's always essential to know more about the coverage you choose to get. As a novice in insurance, you might find it overwhelming and tedious to look for the proper coverage; that's why most people get insurance brokers.

Getting extra assistance when scouting for coverage can help you out tremendously. But don't merely depend on insurance brokers; you, too, need to know what YOU want. And to do so, you need to know the gist of life insurance.

So to help you out, down below will inform you on everything you need to know about life insurance along with its what's, how's, why, and types:

What is Life Insurance?

Life insurance is an understanding between an insurance provider and a policyholder. This coverage aims to provide financial support for your dependents after you pass away or at a certain point in the future.

In exchange for the compensation, the policyholder must pay a monthly premium. The premium may vary depending on certain factors like your age, gender, work, medical history if you smoke if you drink, and your lifestyle.

There are two major types of life insurance: Term life insurance and Permanent life insurance. Each of these main types holds its processes, functions, and conditions. To know more about each one, check them out below!

What are the two main types of life insurance?

Term life insurance - Based on its name, 'termed,' this coverage only lasts for a certain amount of years. How it works is you provide a provider with a time frame to start the compensation, BUT, if you don't pass within the specified period, your coverage expires without payout.

Permanent life insurance - This policy is permanent and typically has a cash value component that you may use to withdraw or take out loans while you're still living.

What are the common insurance policies and their types?

So to make better choices when getting life insurance, consider knowing its types below!

● Term life insurance

This coverage is sold in lengths. Depending on you, you can choose to get one year, five years, ten years, 20 years, and even 30 years. It's the cheapest life insurance on the list, but it expires and has no payout when you outlive your coverage.

● Whole life insurance

This coverage falls under Permanent life insurance, meaning this policy will last you till death. As long as you expend your monthly premiums, you can expect a guaranteed rate of return that builds in cash value. Note it's a more expensive alternative, so you should reconsider if you're looking for a more 'affordable' option.

● Variable life insurance

This coverage falls under whole-life insurance, so it's under permanent coverage. Its cash value is connected to investment accounts, and no matter how the market fare goes up or down, it cannot alter its premiums, and its death benefits are guaranteed.

Universal Life Insurance

For universal life insurance, you can expect two kinds - Guaranteed universal life insurance and Indexed universal life insurance. Both fall under permanent life insurance but have different functions and characteristics. To know both coverages, here they are apart:

● Guaranteed universal life insurance

This coverage guarantees death benefits and cannot alter your premiums. But with this coverage, you can expect little to no cash value resulting in cheaper premiums than other forms of permanent coverage.

● Index universal life insurance

For this coverage, its cash value is linked to investment accounts like stocks, indexes, etc. A formula used to calculate your profits is described in the policy, plus your cash value grows over time, and you get access!

How do I get life insurance?

There are various ways to get life insurance, but two typical methods exist for individuals - through a provider or a broker. But as a newbie in insurance, it's best to work with an insurance broker since they know more about insurance, premiums, and more.

An insurance broker is a professional that specializes in insurance and risk. Plus, they work for you, so their main priority is to provide you with the coverage YOU need and want. They can also give you options of providers and coverages to choose from and compare to one another.

But if you select to do it yourself, that's fine too. Make sure to know what you want and understand how life insurance works, the standard rate of premiums, and the types of coverage. This is to ensure you get the best coverage for you.

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