There are different types of life insurance policies available in the market. Before you sign up for a particular plan with a certain insurer, you must first do a review and compare the different plans thoroughly.
This way, it will become much easier for you to choose a policy that makes the right fit for your specific situation. Though you can contact your insurance agent to get detailed information about the various types of policies offered by specific companies, you are advised to do your research as well.
Universal Life Insurance
It is a permanent life insurance policy, which has certain pros and cons associated with it. For example, the best thing about these types of life insurance policies is that they provide the policyholders the most flexibility, but at the same time, they also require you to carefully monitor a lot of things to keep the policy in force.
These policies do not guarantee a fixed amount of growth in cash value and there are no set schedules for payments as well. It means you may have to pay a different amount of premiums at different times. The beauty of this type of insurance is that it offers greater potential for growth in cash value as compared to other policies. Even universal insurance can further be categorized into different types, such as equity-indexed universal life insurance, guaranteed death benefit, variable universal life (VUL), traditional fixed universal life insurance Pubfilm and interest-sensitive policy.
The flexibility in the premiums and the growth of cash value mean the number of premiums sometimes can be very low and the growth in cash value can be very high, but the only drawback is that there is no guarantee. The actual benefits will depend on the performance of the investment subaccounts that you have to choose when you sign up for this policy. It means you always need to keep a close eye on how your investment sub-accounts are performing.
Whole Life Insurance
This is one of the most common types of life insurance policies, which is more expensive than universal policies but guarantees a fixed growth in cash value. Besides that, even the premiums are fixed. Guaranteed death benefits are another advantage. Furthermore, the cash value as mentioned in your policy does not get affected adversely because of mortality and expense charges. The drawback is that there is no flexibility.
It means you will not be able to get more than a fixed amount of benefits. But again, regular monitoring is also not required here. It gives you peace of mind; you can do your budgeting more efficiently because the premiums are fixed to a certain amount every month. You can also opt for the annual mode of payment, where you will be required to pay a fixed sum of money one time annually.
As compared to monthly payments, annual payments are usually less expensive, as companies provide a special discount for that. However, another problem with a whole life insurance policy is that the internal rate of return as shown in the insurance contract is usually not very competitive with other savings or investment alternatives. Besides that, it is also very important for you to keep in mind that in case of death of the policyholder, the insurer pays only the death benefits to the beneficiaries, not the actual cash value.
At the same time, there are also options to add riders. For example, you can use policy dividends to change the amount of death benefit, but again, whether there will be an increase or decrease in the number of death benefits will entirely depend upon the performance of the dividends. But yes, there is another very simple alternative to increase death benefits; you can do this by adding a rider, where you agree to pay additional premiums.
Term Life Insurance
Among the various types of life insurance policies, term life insurance is probably the most common one. In this insurance scheme, you have to pay a specified amount of premiums every month or every year (depending upon the mode of payment you have opted for), and in return, the policy provides coverage for a limited number of years. Depending upon your specific preferences, you can opt for a policy for one year, for 5 years, for 10 years, for 15 years and the like. Different companies have different provisions in this regard.
The important point to note here is that term life insurance does not accumulate cash value. It means this policy provides protection only in case of death, nothing else. There are three main elements of this type of life insurance – term (length of coverage), cost of insurance (amount of premium) and Death or Protection Benefit (face amount).
If you shop around, you can find different combinations of these three elements with term policies offered by different companies. For example, some companies may offer you an option to keep the face amount fixed or flexible. Term life insurance can further be categorized into different types, such as renewable insurance tntdrama com activate, mortgage insurance, annual insurance, and level insurance.
As compared to the above two types of life insurance policies, term insurance is undoubtedly the simplest as well as the cheapest type of life insurance. When the term ends, you get an array of options. For example, you can simply assume that you are no longer insured and stop paying the premium, but in this case, you or the beneficiaries will get no benefits at all.
Here, it is important to note that your policy does not terminate automatically. If you want, you can keep the policy running by continuing to make the premium payments; it is just that the number of premiums will now be changed (much higher than what you were paying earlier).
Another option is that you can convert your term life insurance policy into a permanent policy, such as Universal life insurance or whole life insurance. Overall, now that you have an idea of how the different types of life insurance policies work and what their pros and cons are, it is up to you to decide which policy makes the right financial sense for your specific situation.