- 1 Introduction
- 2 Term life insurance
- 3 Whole life insurance
- 4 Universal life insurance (UL)
- 5 Variable life insurance (VLI)
- 6 Variable universal life insurance (VUL)
- 7 Group life insurance
- 8 Many people have heard of life insurance, but it helps to understand the specific kinds of coverage and how they work.
- 9 Conclusion
If you have a family to provide for, life insurance is one of the most important financial decisions you’ll ever make. Unlike term or whole life insurance, which are both forms of permanent coverage that keep paying out as long as you live, variable and universal policies can be structured in various ways to meet your changing needs over time. That’s why it’s important to understand exactly how each type works before making a commitment—especially since these types of policies may not be what’s best for everyone. On the other hand, group policies offer an easy way to get started with minimal effort on your part; however, they may have limitations when compared with individual plans.
Term life insurance
Term life insurance is a policy that covers you for a specific period of time, usually 10, 20 or 30 years. You can renew the policy after it expires, but at a higher cost. Term life insurance is typically cheaper than other types of life insurance because it’s meant to last only for a limited amount of time—you won’t need coverage forever—and because the risk is lower since there’s no cash value built into your plan (more on this later).
Term policies are often bought by people who don’t have much savings or income and need short-term protection until they reach retirement age. They’re also sometimes purchased by younger people whose primary concern is making sure their families will be provided for if they die unexpectedly during their prime earning years. But even if you’re in your 50s or 60s and don’t think it makes sense financially to keep up with monthly premiums any longer, keep in mind that term policies are flexible; they can be renewed at any age and rate!
Whole life insurance
You’ve probably heard of whole life insurance, and you may have even considered it as an option. If you’re not sure what whole life insurance is and how it works, this section is for you! (If you already know what whole life insurance is and want to learn more about some of the other types of permanent life insurance, skip ahead!)
Whole life is a type of permanent life insurance that pays out benefits when you die. Whole life policies are usually sold with a hefty annual premium—the amount that must be paid every year in order for the policy to remain in force. This means that people who choose whole life will often pay more in premiums than they would with other types of policies like term or universal coverage. The benefit: They get some money back if they die prematurely (meaning before their term date). The drawback: They lose out on potential savings from lower-cost options.
Universal life insurance (UL)
Universal life insurance (UL) is a type of permanent life insurance. It’s also called “variable universal life,” because it can be structured to have more than one premium paid, and the cash value that grows tax-deferred can vary based on how the policyholder invests it. UL policies have a death benefit (the amount you’d receive if you died) that’s guaranteed by an insurer, unlike term life policies, which only pay out if you die during the policy term or in some special circumstances.
Since UL policies are meant to last for your entire lifetime, they’re often used as part of long-term estate planning strategies. You could use them to provide income for your heirs after death while minimizing estate taxes; or save up money over time until both spouses are deceased so that their estates will require fewer probate fees and legal costs when they pass away.
Variable life insurance (VLI)
Variable life insurance is a unique type of life insurance that allows you to invest your premiums and earn tax-deferred or tax-free growth and build a cash value.
The core principle behind variable life insurance combines two elements: the death benefit, which is the amount you receive if you die; and the accumulated cash value, which consists of premiums paid into the policy (the sum total of all deposits minus withdrawals) plus investment earnings.
As with other types of permanent coverage, it’s important to understand how much coverage you need in order to plan for a financially secure future. With this type of policy, however, there are additional factors at play when determining what makes sense for your situation since VLI policies come with several built-in investment options from which to choose and require ongoing maintenance due to ongoing funding requirements.
Variable universal life insurance (VUL)
Variable universal life insurance (VUL) is a type of permanent life insurance policy that combines features of term and whole life. It allows you to choose the amount of coverage and pay varying premiums based on your budget.
You can also invest the premiums in an investment account, which increases the policy’s cash value. If you need funds from this account before your death, VUL policies have a surrender period – typically six to 10 years – during which time you can withdraw funds without having to pay any additional taxes or penalties.
Group life insurance
If you work for an employer that offers group life insurance, you may be eligible to receive a benefit. Group life insurance is typically provided by employers as a benefit of employment and often includes coverage for your spouse and children. Group life insurance can be less expensive than individual policies because it covers multiple people at once, which decreases the overall cost of the policy.
However, if you have an individual policy with your employer then they could choose not to continue providing group benefits after they stop employing you (this would depend on whether or not other employees are still eligible). Additionally, if you don’t qualify for coverage under their plan or choose not to participate in it then it won’t help pay funeral costs or supplemental medical expenses after death.
Many people have heard of life insurance, but it helps to understand the specific kinds of coverage and how they work.
Life insurance is a contract between you and an insurance company. You pay a premium, and the company agrees to pay out if you die. There are two basic types of life insurance: term and permanent (whole or universal). Term life insurance provides coverage for a set period of time, such as 10 years or until retirement age. Permanent coverage provides lifetime protection against death in exchange for annual premiums.
Whole life insurance has the potential to provide cash value that grows over time; universal life does not have this feature but is typically less expensive overall than whole life policies because it doesn’t come with any cash values attached to them at all (although there are exceptions).
If you’re looking for a way to protect your family, life insurance is a great option. The different types of coverage can help you find the right fit for your needs and budget. It’s worth taking the time to understand each type so that when it comes time to make a decision, you know what will work best!