Types of Life Insurance

Types of Life Insurance_990

Most life insurance companies offer four basic types of life insurance. Some companies offer other options, but they are usually specific to the company or are much less common. The listed options are the most commonly available and most companies offer them. It is advisable to speak to a representative from any company you’re considering. They can make the finer details of a policy clearer and answer your questions.

The four common life insurance options:

 Term Life Insurance:

  • Lasts for a set amount of time.
  • If you pass away during the policies term, your dependants will receive the determined payout.
  • After the policies term is over, your coverage ends.

Term life insurance is the most basic type of life insurance. You choose a set period of time to be covered. As long as you pay your premium on the policy and you pass away within the policies term, your dependants will receive the payout. After the policies term is over, your coverage ends. Some companies offer an option to extend your term life insurance period, but the premiums you pay will increase for each year you extend it by. Term life will also not offer the bundling of insurance like travel insurance in Canada or health insurance.

Types of Life Insurance

Whole Life Insurance:

  • Similar to term life insurance.
  • Lasts for your entire life.
  • Has an investment component, so some of the money you put in is invested in various vehicles.

Whole life insurance is very similar to term life insurance. The main difference is that the policy is active for as long as you live. As long as you pay the premium, upon your death your beneficiaries will receive a payout. Another advantage to whole life insurance is that there is an investment component included with it. Some of the money you put into the policy will be invested, potentially allowing more money to be payed to your beneficiaries.

Universal Life Insurance:

  • You choose how much you would like to put into the account beyond the premium.
  • Excess funds will be invested into various vehicles.
  • The investment and returns are placed into a cash value account.
  • The cash value account can go towards the face value of the policy or the cash account plus the policy amount can be given to the beneficiaries.

Universal life offers a strong investment component. You can choose to put as much money as you wish beyond the premium and the excess will be invested into various vehicles. Investments are placed into a cash value account. You can allow this cash value account to build or have it go against your premium. There are two types of universal life, with Type I the cash account goes towards the face value of the policy. With Type II the beneficiary will receive the face value of the account plus all or most of the value of the cash account.

Variable Life Insurance:

  • Similar to universal life.
  • Offers more investment vehicles.

Variable life insurance is quite similar to universal life insurance. Variable life offers more investment opportunities though, such as stocks and bonds. You can choose either Type I or Type II just as you can with universal life.

These four types of life insurance are the most commonly available. There may be other life insurance options, that’s why it is important to speak to a representative, they can show you every life insurance option.

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