The Different Types of Life Insurance Explained

different types of life insurance explained policies

Ensure that your family is provided for. Assure them that everything will be okay if you get into an accident. 

Life insurance makes a difference in millions of peoples' lives. But many people can't distinguish between health insurance types. 

Don't worry. You can learn the major differences in no time. Here is a quick guide to the different types of life insurance. 

Term Life Insurance 

The biggest benefit of life insurance is the death payout. If you pass away while you are covered, your insurer will give money to your family. Other benefits of life insurance include providing for retirement and paying off a mortgage. 

Review any policy you find carefully. Talk to a financial advisor to consider your financial picture before purchasing insurance. 

Term life insurance is life insurance that lasts one term. The insurer defines the term in advance, usually lasting 10-30 years. Coverage amounts vary, but payouts can total millions. 

Term life insurance is the cheapest life insurance available. But you receive no coverage if you outlive the policy, and most plans are non-renewable. If you need coverage for a brief period of time, term life insurance can work for you. 

Whole Life Insurance 

Whole life insurance is life insurance that lasts a person's entire life. You must pay monthly premiums, but you receive thorough coverage. Most policies build in cash value at a consistent rate. 

Whole life insurance is perfect for people who want a high payout. Some policies let you earn annual dividends, in which you get some amount of your insurer's profits. 

But whole life insurance is very expensive. Many policies do not feature complete benefits. 

Universal Life Insurance 

Universal life insurance offers similar benefits to whole life insurance. What distinguishes universal from whole life insurance is that premiums are flexible. 

You can raise and lower the amount you pay. You will need to make on-time payments, and there is a minimum limit to payments. As long as you exceed that minimum, you retain your coverage. 

Missing one payment could result in you losing coverage. There is no cash value in the policy, so you would receive nothing if you forfeited it. 

Indexed universal life insurance does have a cash value. Insurers link the cash value to the stock market, though there is a cap on investments. You will need to monitor the stock market to get the most value out of your policy. 

Underwritten Insurance 

Underwriting is a process in which insurers take on financial risks for fees. Insurers evaluate the risk they take through medical examinations. 

You do not have to take a medical examination for your insurer. But your insurance will be expensive and your coverage amounts will be low. 

If you take an exam and are healthy, your insurance may be fully underwritten. Your insurance rate will be cheap, and you will receive stronger coverage. 

You can also take a small exam with a few health questions. You will then receive partially underwritten insurance. But you may be turned down based on your answers. 

Know the Different Types of Life Insurance 

Life insurance ensures that your family is provided for after you die. To give your family the most assurance, you need to distinguish between the different types of life insurance. 

Term policies last a few years, but they are affordable. Whole life policies last an entire life, providing maximum benefits but at high premiums. Universal life insurance has flexible premiums and the potential to increase payouts. 

These life insurance policies depend on underwriting. For the maximum value of your policy coverage, take a medical exam. 

Know what you need to know to provide for your family on a budget. Follow our coverage for more guides in the Insurance and Finance sections of the Bootstrap Business Blog.

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