Different Types of Life Insurance

There are two key types of life insurance policies: term and whole life. Whole life insurance is permanent life insurance and can be divided into four subcategories. Term life insurance, as adequately named, is just for a certain period of time.

Whole Life Insurance

Whole life insurance, also regarded as permanent life insurance, pays out the sum you have been insured for whenever you pass away. There is no limit to how old you can be when you finally pass away.  Within whole life insurance there of the four categories are considered major life insurance policies.  These are traditional ordinary life, universal life, and variable universal life and within each of these policies there are various other types and variations of the policy.

Traditional ordinary life insurance is the most common type of whole life insurance; this is due to the fact that the payments in regards to premiums remain fairly common. You are 'overcharged' so to speak in the beginning so that when you are older, the premiums for the life insurance become less and less. Agreeing to this policy simply states that you will pay a settled amount during your life time which will then give you a death benefit. Along with the death benefit comes with a saving account (if your life insurer offers that). The benefit of the savings account means that the company will pay you specific dividends in order to grow the savings element.

Universal life insurance is also known as adjustable life insurance. This policy allows you a lot of freedom and greater elasticity then the normal whole life insurance. You may increase your death benefit whenever you choose; however, this is only increased if you pass a medical examination. Universal life insurance comes with a standard cash value account that generates an income for you at a money market interest rate. The great thing about the universal life insurance is that once a certain amount of money has accrued into your account, you can choose to alter your premium payments. If there is enough money, your premium payments can become less.

The Variable-universal life policy gives you the opportunity to have the universal life insurance and the variable life insurance in one. The variable aspect of the life insurance allows you to have the risk to invest in stocks, money market and bonds, while also offering you the flexibility of the universal life insurance. This flexibility allows you to change your premiums and change your death benefit. However, as with a variable life insurance, if your investments do not go well this could negatively influence your death benefit.

Term Life Insurance

The simplest and easiest life insurance is term life insurance, which only pays out the death benefit during the term of which the policy is held. Term life insurance can range from one year to 30 years and is a common form of life insurance used by companies to insure their employees. Though term insurance is the more popular of the two, it is not the best. Besides the death benefit no other provisions are made.

Level term and decreasing term are the two basic types of term life insurance. Level term life insurances means that the death benefits will stay constant during the term of the life insurance. While the decreasing term life insurance sees that the death benefit decreases after certain time increments. These increments are usually arranged with the insurance company but are generally done in a one year increment.

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