Have you ever thought of what would happen to your family if you passed away? What would they do with all the debt you currently have? Would they be able to settle it without you?

Would they be able to settle the monthly bills without your income? If you’re answering no to these questions, then having life insurance would be a lifesaver for your loved ones. It’s a paradox to have car insurance or homeowners’ insurance and not have life insurance, right?

There are many different types of life insurance policies, but a huge percentage of Americans don’t have any. Only about 54% of citizens have some kind of life insurance. The need gap extends to about 41 million people who, despite needing life insurance coverage, don’t have any.

If you’re in this category and are considering getting coverage, we’ll discuss the different life insurance options. It’ll help you make an informed decision about which type suits you the best.

Term Life Insurance

Term life insurance is the most basic, most affordable, the simplest, and mostly the best life insurance. The reason behind this is that it does only one thing, which is to pay the people you choose as your beneficiaries a fixed amount of money upon your demise.

It could be your spouse, children, or other family members. The most important thing you have to understand about term life insurance is that it’s only active for a given amount of time, in this case, the “term.” It could be 10 years, 15 years, or even 30 years, and it’ll be worthless unless you die in the course of that time.

Essentially, you’ll be paying an insurance company to assume the financial risk of your death during the term policy. This means that if you purchase a 15-year term policy with a $500,000 cover, you’ll pay every month for 15 years. If you pass away during those 15 years, the insurance company will give your family or beneficiaries a check for $500,000 as a death benefit.

Permanent Life Insurance

Permanent life insurance differs from term life insurance in the sense that it does two things instead of one. Among the different types of life insurance, permanent life insurance will provide you with death benefits and an investment account. It comes with a cash value that you own and can borrow as a loan whenever you want.

The longer you pay for the policy, the more cash value you will have. Permanent life insurance will also not expire and will continue until you either pass away or stop paying your premiums. A permanent life insurance policy could either be whole life insurance, variable universal life insurance, or universal life insurance.

Whole Life Insurance

Whole life insurance doesn’t expire, unlike term life insurance. It features a death benefit and a cash value, which makes it more like a savings account. For this reason alone, a whole life insurance policy can be up to 15 times more expensive than a term life insurance policy.

When you get a whole life insurance policy, you lock in a premium amount. Every month, you pay the premium to the insurance company, and it doesn’t change for the rest of your life.

Part of that premium goes into the cash value, and the longer you’re on the insurance policy, the more cash value you will have.

Universal Life Insurance

A universal life insurance policy also features a death benefit and cash value. However, it differs from a whole life insurance policy in the sense that it features adjustable premiums. This means you can change the premium amount you pay without having to purchase a new policy.

Despite the fact that you’ll need to pay the minimum premium to keep your policy active, you can use the cash value to pay your premiums. Once your cash value accumulates, you can stop paying your premium and let the interests do the work.

This can continue until all the cash value is depleted, and then you can resume your payments. The cash value interest rate for universal life policy is subject to current market rates. If the interest decreases, your premiums will increase to offset the balance.

Variable Life Insurance

Variable universal insurance not only has a death benefit and the cash value but also a mutual fund. The life insurance cost can be pretty hefty with this one. The policy allows you to decide how the cash value you accumulate is invested.

There are numerous bonds and stocks you can choose from, and you get to choose which ones you want to invest in. It’s the reason why this is called a variable policy. On the downside, you don’t select from the open market but from what the insurance company is offering.

The one thing you have to keep in mind is that you will bear the risk and not the insurance company. There is no guarantee that your cash value investment will succeed. Make sure you talk to professionals from a reputable company such as Insurancehero.org.uk to understand if this is best for you.

Joint Life Insurance

Joint life insurance is also known as first-to-die insurance. The cash value covers two people who would like to share an insurance cover between them. Basically, the policy covers spouses for the cost of one policy and pays the death benefit when the first person dies.

The downside of this policy is that it pays the same amount of benefit, regardless of whether one spouse has a higher income than the other. You should weigh the options to decide whether having an individual policy would be cheaper depending on how much each one of you earns.

Survivorship Life Insurance

There are several different life insurance policies, and survivorship is the second-to-die life insurance policy. It pays the beneficiaries after the second spouse dies.

Final Expense Insurance

Of all the different types of life insurance policies, this one may seem to make a lot of sense. It’s relatively cheap and pays for the funeral expenses. This is an attractive option for older people who missed out on the chance to purchase other different kinds of life insurance policies when they were younger.

It could also work for people whose term insurance policies expired. However, given that the median burial costs stand at about $7,000, you can easily save the amount yourself if you’re younger.

Different Types of Life Insurance Policies: Making It Easy for You to Choose

These are the different types of life insurance policies. There are several more that fall under these, but these are the mainstream. Getting life insurance doesn’t have to be complicated, but it’s crucial for you to compare all policies depending on your age and income.

You can also talk to a financial advisor or an insurance broker to determine which policy suits you best. If you’d like more informative posts, please check out our website.