Different Types Of Life Insurance Policies Explained
In life, we all protect our loved ones and the assets we own. We buy health insurance for family members, house insurance to protect our property. However, there are times when you tend to forget about protecting an essential asset of life—yourself.
It is very important to remember that life is full of uncertainties and misfortunes, most of which come unannounced. Have you ever thought about the financial requirements of your loved ones in your absence? Taking a suitable life insurance policy is highly recommended.
Buying a life insurance policy is the smartest decision that anyone can make in a lifetime as this helps protect your loved ones from life’s uncertainties. Before you buy life insurance, you should be fully aware of everything about it and the types available.
Different Types Of Insurance Policies
Term Insurance Plan
Term Insurance is one of the most affordable life insurance plan types, which is the reason it is the most sought-after type of life insurance policies. Apart from being affordable, term insurance also offers huge life cover to the family members of the deceased. It can be purchased for a specific period of 10, 20, 30 or more years, hence the name.
Unlike the other insurance policies that offer maturity benefits to the policy owner, term insurance plan offers benefits to your family members in the event of death. It is, in real terms, pure life cover. You can choose the life cover amount as per your requirements.
Term insurance with return of premium
This is a type of ‘Term Insurance’ that offers death benefits without any maturity benefits. This means, you get the returns after a particular time, making it one of the best options to cover your death and get maturity benefits in case you are lucky enough to live even after a particular duration.
Whole Life Insurance
As the name denotes, this is a type of life insurance that will last for an insured person’s whole life. One important thing to know about whole life insurance is that it comes with a level premium structure, so you can build some specific amount of cash over a time. You can also opt for dividend payments from the life insurance company.
In case of a traditional whole life insurance plan, the death benefit and the premium remain the same throughout the life of the policy. The cost of benefits, on the other hands, increases as the insured person ages. This may make it hard for the insured person to pay increasing premiums at the later stage of life, which is why companies charge that premium in the early years. This means the premium you pay at an early stage of life is more than what you need to pay, which is later used to supplement the level premiums at the later stage of life.
Universal Life Insurance
There are 2 types of universal life insurance plan:
- Guaranteed universal life insurance – With this plan, you get guaranteed death benefits while paying the same premiums. And you can choose the age to which you want to get death benefit e.g. 90 to 100 years.
- Indexed universal life insurance – It will link your cash value to a stock market index like the S&P 500. You get the benefits that are calculated by a formula, which is outlined in the policy.
Variable & Variable Universal Insurance
The variable and variable universal life insurance plans can also be called a mix of life insurance and investment policy as the cash value is tied to investment accounts like bonds and mutual funds. You get a guaranteed death benefit and fixed insurance premium, regardless of how the market fares.
However, when we talk about variable universal life insurance, the premiums may be adjusted and you do not get guaranteed death benefits.
Regardless of what type of life insurance policy you choose to protect your life and future, make sure to understand the terms and conditions of the policy. Consultation from a professional in the field may be also a great benefit to cover your life in the smarter way while saving on premiums.