Although there are a lot of life policies with different levels of coverage and benefits available, the different types of life insurance explained below are some of common ones available:
Term Life Insurance
Term life is like renting the insurance. You purchase life insurance for a set amount of time. You pay premiums for the the term (10, 20 or 30 years etc.) and once the term is up the death benefit is gone. Term life insurance is broken down into different types:
- Level Term: Your premium and death benefit stays even for the length of the term.
- Annual Renewable Term: The death benefit remains stays the same, but here the policy renews annually – almost always increase in premium each year.
- Decreasing Term: The death benefit decreases each year while the cost remains the same. The policy ends when the death benefit equals zero.
Advantages vs Disadvantages Of Term Life Insurance: Term life policies are less costly than the whole, universal, or variable life insurance. The disadvantages is they end and do not build up any cash value.
Mortgage Life Insurance
AKA mortgage protection insurance – it can repay your mortgage in the event you die before your loan is paid off. This gives peace of mind to your family, who won’t have to continue paying the mortgage without your income – so they can stay in the home.
Whole Life Insurance
Whole life insurance offers a savings component, called ‘cash value’, and offers death benefit protection to age 100 or beyond, assuming premiums are paid. After death, whole life can help your family replace a a loss of income, help pay the mortgage, educational costs – or pass money on to your children or grandchilden.
Advantages vs Disadvantages Of Whole Life Insurance: Your premiums and death benefit are fixed and can last your lifetime. You can also withdraw cash or take out a loan and you have a guaranteed rate of return. The disadvantage is whole life is more expensive than term.
Universal Life Insurance
Universal life insurance offers a death benefit with a cash benefit. Instead of selecting a term all premium going to the death benefit, part of your premium goes into a cash account. This cash account earns interest and accumulates tax-deferred.
Advantages vs Disadvantages Of Universal Life Insurance: Universal life insurance provides flexibility in in some cases you could actually stop paying premium -s as long as the cash value can cover the cost of insurance. Also you may also be able to increase or decrease the death benefit. You can usually borrow against the policy in the form of a loan. The disadvantage is these benefits have a cost, universal life is more expensive than term.