Do you know the difference between the various kinds of life insurance and their benefits? The three primary types of life insurance: term, whole and universal life, have distinctive features that appeal to different people based on factors like their age, their long-term goals, and whether the they have any dependents.
Whole Life Insurance
Whole life insurance is designed to provide a cash benefit payable upon death and is valid for the life of the insured. So long as premiums are paid and the policy is not allowed to lapse, coverage will never expire, regardless of whether the policy is purchased at age 2 or 52. In addition, the premiums on a whole life policy never increase, even as the insured individual ages, or develops health problems or other risk factors. Whole life insurance is appealing to many people because it accumulates cash value as premiums are paid over time. The cash value is guaranteed, and the policyholder may borrow against it or cash out the policy at any time.
Universal Life Insurance
Universal life insurance is a more complex type of coverage. It is similar to whole life insurance in that it offers coverage for life; however, it provides greater flexibility as a financial growth product. The American Institute of CPAs explains it like this:
- Premiums are deposited into a cash account each month
- The insurer invests the money on behalf of the policyholder and contributes interest back into the account.
- The company deducts policy expenses, fees and the cost of insurance
Other benefits include:
- Policyholders can borrow against its value or make cash withdrawals.
- Premiums can be reduced or skipped altogether when affordability is an issue
- The policyholder determines how much money to pay into the account each month, allowing for rapid cash value growth.
Term Life Insurance
Term life insurance is by far the most popular type of coverage in the U.S., as it is designed for one purpose: financial security. Term policies can offer generous death benefits calculated to replace many years of income should the policyholder pass away prematurely. It is not uncommon for a death benefit to be up to $1 million or more, especially if the insured individual has multiple dependents, has several working years left, or has a large debt such as a business loan or a mortgage.
Term life insurance offers a low premium and guaranteed death benefit for a given period – usually 10, 20 or 30 years. Premiums paid into a term life policy do not accumulate cash value, but the low cost of coverage makes it an attractive life insurance option for families and other individuals who have not yet reached retirement.
Which Type of Life Insurance is Right for You?
The choice to purchase life insurance is an important one, and the types of coverage you select is just as significant. We invite you to contact Integrity Insurance Agency to discuss the various type of life insurance and let us help you evaluate which one will serve your family best. Call today for your free life insurance quote. We look forward to serving you soon.
