Home » Life Insurance » Understanding The Different Types Of Life Insurance Policies

Understanding The Different Types Of Life Insurance Policies

The number and different types of life insurance policies available on the

market can be overwhelming and confusing to choose from, especially if you

have never purchased a life insurance policy before. Understanding what

types of policies are available to you and what they can offer, even before

beginning the search, can make it easier and less time consuming. Here is

some basic information about the types of life insurance policies that you can

purchase, and how to select the one that is right for you.


Types Of Policies

There are two general categories of life insurance policies: temporary and

permanent. They both include coverage in the form of a payout to your

chosen beneficiary in the event of your death, but the additional benefits

these policies can offer you differ, namely from their investment possibilities

to providing coverage for an inexpensive premium.


Temporary Life Insurance

The most common type of temporary life insurance policy is more commonly

known as term life insurance. This type of insurance offers you death benefit

protection for the term of the policy, typically 10 or 25 years. At the time

the term expires, so does the policy, though many offer renewal options at

an increased premium. The benefit of term life insurance is that it offers

maximum payout for the lowest premiums. This is especially true the

younger you are.


Permanent Life Insurance

Whereas there is really only one type of temporary insurance policy, there

are a number of different options in the permanent life insurance market.

Whole Life Coverage—This includes guaranteed death benefits, guaranteed

cash values, and the security of a fixed annual premium.

Universal Life Coverage—This option provides you with greater flexibility in

both premiums and potential return. It still offers both a payout in the form

of life insurance coverage and the potential of a cash value to increase with

the term of the policy.


Limited Pay—This is basically permanent and term life insurance combined in

that you only pay premiums for a specific term; however, you still receive

the death benefit after the term expires, though usually at a reduced rate.

Endowment—This type of policy, which is similar to annuities, acts more as

an investment than does traditional life insurance. The principal is protected

and a payout is guaranteed, but the premiums are much higher than those of

other types of life insurance.

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