07 Jan Types of Life Insurance: Beginners Guide
Life insurance can be quite daunting and choosing the right type of life insurance policy can prove to be a feat of superhuman discernment. With so many different types of life insurance, and with insurance brokers offering deals and bundles, researching and choosing a life insurance policy that’s right for you can turn into a full-time job.
With a little help from the right people (that’s us), you can narrow down the life insurance offerings from many of the major insurance providers and make it easier on yourself to pick a plan that fits you best. Finding a good guide to the types of life insurance (that’s this article) can help you educate yourself on the options you have for life insurance coverage to make sure your family isn’t left high and dry when you die.
Term Life Insurance
Term life insurance, also known as pure life insurance, is life insurance that ensures payment to specified beneficiaries during the policy term. Once the term expires, the policyholder can renew it for another term, convert the policy to permanent coverage (also known as whole life insurance, expounded on later in this article), or allow the policy to end with no payout to the beneficiaries.
The policy’s purpose is to give insurance to individuals against the loss of life. All payments by the policyholder cover the cost of maintaining the life insurance policy itself. As a result, term life insurance premiums are lower than those on other life insurance policies.
What Term Life Insurance Includes
Term life policies have no value other than the guaranteed payout of the death benefit upon the death of the policyholder. This cash benefit may be used by beneficiaries to settle the policyholder’s healthcare and funeral costs, to pay off debt, or to pay mortgage debt, among others.
Since the payments only cover the cost of the life insurance policy itself, the policy is usually very simple and straightforward. The only thing included in most term life insurance plans is the payout to the beneficiaries in the event of the death of the policyholder.
Perks of Term Life Insurance
Term life insurance is very cheap. It costs the least out of any of the major life insurance offerings from all the major insurance providers. You can be sure that term life insurance has you covered without eating away at your wallet.
Term life insurance is flexible. You can get many different versions of term life coverage based on your price point and the insurance company that you choose. With low obligation to the specifics of the life insurance policy of term life insurance, you can easily change or cancel the plan whenever you desire.
Term Life Insurance is Perfect For…
Term life insurance is perfect for basically every person at any point in life. Typically, young people with new families are a target demographic for term life insurance. Because of its relative simplicity and low monthly price tag, the value lends to any walk of life. Every person should get a life insurance policy, and getting a term life insurance policy is so easy and inexpensive compared to some other options that it just makes sense.
Term life insurance is a great choice for people of every walk of life to make sure you and your family are covered just in case tragedy strikes. The low premiums and high payout to the beneficiaries, this life insurance policy is perfect for anyone. Even if you already have a life insurance policy, you can get another term life policy to make sure your double covered.
Whole Life Insurance
Whole life insurance is just that: life insurance that lasts throughout your whole life. Its benefits well outweigh the rise in premiums from a term life insurance policy. Many people look at whole life insurance as a way to safeguard money in the event that tragedy strikes and your family is left behind with the payout of your life insurance.
What Whole Life Insurance Includes
Whole life insurance policies are similar to term life insurance but differ in two distinct ways. Your premiums not only pay to facilitate the insurance but add to the value of the payout to your appointed beneficiaries. Another difference is the length of time that life insurance is in effect.
This seems like a given, but in the abundance of clarity, we wanted to include it to make sure everything about life insurance made sense. Whole life insurance policies last for the lifetime of the policyholder as long as they continue to pay their premiums.
Perks of Whole Life Insurance
The coverage of your life insurance is guaranteed over your entire life as long as the premiums are paid at the proper times. This makes whole life plans one of the simplest plans with the least headaches of all the life insurance options.
Coupled with the coverage of whole life insurance is the cash savings that, depending on the plan and company you get your insurance from, may be invested to bolster growth for a higher payout to the beneficiaries. This cash savings can be drawn upon after an allotted timeframe, which could be based on time in general or the number of premiums paid.
Whole Life Insurance is Perfect For…
Whole life insurance is perfect for anyone who knows money is not a factor and who wants an insurance plan that is no-nonsense. Since whole life insurance is a “set it and forget it” kind of policy, its great for people who want to just pay the premiums when they are due and not really think about it. As time goes on the cash value can be drawn upon, so this makes it perfect for someone who is looking for a long-term moneymaker.
Universal Life Insurance
Universal life insurance is a sort of middle ground between term and whole life insurance policies. Depending on the company you go with, universal policies can have many different perks and features, as well as differences in payment schedules and pricing.
It also introduces some new things that neither of the other types has such as lump sum premiums and flexible premiums, which we will get into further down in this article. Universal life insurance is offered by most life insurance providers as a cheaper alternative to whole life insurance policies.
What Universal Life Insurance Includes
Universal life insurance can include the best of the other two major types of life insurance. This can mean low premiums like term life insurance coupled with cash value and lifetime coverage, similar to whole life insurance policies. This may seem like the best option because it blends the best things from the other two, but that all depends on what company you go with.
Some companies require a lump-sum premium, which is a large “down payment” as a way to start the policy. This can be a difficult option for people on a budget. This lump-sum premium may be coupled with small monthly premiums, so if you are able to pay the large premium upfront, this option may suit you well.
Perks of Universal Life Insurance
Universal life insurance is flexible. The policyholder has the ability to change quite a few things about their insurance plan at any time. These things include adjusting the size and timing of premiums as well as reducing the death benefit by increasing the cash value of the policy.
Universal life insurance typically has a cheaper premium. With the exception of the lump sum premium that may be a part of the universal life insurance policy, the monthly, quarterly, or annual premiums are much lower than the corresponding premiums in whole life insurance.
Universal Life Insurance is Perfect For…
Universal life insurance is perfect for someone who wants the benefits of whole life insurance with the cost of term life insurance. If you find the right offering of universal life insurance, you can get the perfect balance of both of the other main types of life insurance policies, making universal life insurance the best option.
If you are looking for the perfect blend of term and whole life insurance, universal life insurance may be just that. You may find that the lump sum premium is too much, or you may never be faced with that, in either case, universal life insurance can be a great option to consider.
What Type of Life Insurance is Best?
The perfect life insurance policy doesn’t exist, but universal life insurance gets very close with the right caveats. Tulsa Insurance Guy can help you find a universal insurance plan that meets your criteria and fits within your budget. Make sure your family is taken care of right in the event that you die.
Tulsa Insurance Guy is an insurance broker in Tulsa specializing in life insurance, auto insurance, and homeowner’s insurance. They work with over 70 insurance providers to make sure you have countless options to cover your life, home, vehicles, and all your toys.
Give Tulsa Insurance Guy a call to set up the perfect plan for you and your family and make sure that everything the concerns you are covered by the perfect insurance plan.
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