Life insurance can be relatively confusing at times. There are several different types of life insurance, but to better understand we have given a brief explanation about them.
The two basic types of policies are: whole life and term life insurance.
Whole life policies are a kind of permanent insurance. Whole life insurance combines the benefits of an investment with life coverage. When you purchase whole life insurance you are purchasing an insurance policy that pays a fixed and stated amount in the event of your death. A portion of your insurance premium is used for building cash value. This cash value is derived from the investments that are made by the insurance company. You can borrow money against the cash value without facing a tax penalty. The whole life premium is usually consistent throughout the entire policy.
The second basic type of coverage is term life insurance. Term insurance has no investment portion. You are buying coverage that is predetermined, and you are covered within the term or set period in time considering you pay the monthly premium. This policy has no cash value, and only pays in the event the insured dies within the term and the policy is up to date.
Universal life is one of the types of life insurance that combines a money market type of investment with term insurance. The rate of return that is paid on this policy is a money market rate. To get a higher yield, these types of policies usually don’t promise a certain rate or premium.
Variable universal life and variable life insurance are both permanent life insurance policies. They are tied to an investment fund that derives its value from either a mutual fund or stock investment. As with stocks and bond mutual funds there is no specific return that is guaranteed. In a matter fact, you can have a 0 return.
There are several types of insurance, and another type is annual renewable term. This is purchased every year, and you do not have to re-qualify by taking physical exams.
Of the several types of life insurance out there, several of them have customizable features called riders that can make any policy work for your lifestyle and needs.
Life Insurance Facts : About Different Types of Life Insurance
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