iQuanti: Life insurance pays out funds to your loved ones when you die, giving them financial security and peace of mind. Some plans also allow you to build wealth through a cash value component that can accumulate over time. There are many types of policies that may be available to you, and each may suit different financial goals and life circumstances. Let’s dive deeper into several of the main types of life insurance so you can compare life insurance quote and decide which policy is right for you.
1. Term life insurance
Term life insurance is a type of policy that covers you for a set period of time, usually 10 to 30 years. If you die while the policy is in effect, your loved one will receive the death benefit. After your policy term ends, you will need to purchase a new policy to continue to be covered. Term life insurance premiums tend to be more affordable than permanent life insurance premiums.
2. Whole life insurance
Whole life insurance is a type of permanent life insurance policy, meaning it provides guaranteed lifetime coverage as long as you continue to pay premiums. A portion of every premium you pay is allocated to a growth component called cash value, which grows tax-deferred at a fixed rate. As the cash value increases, you can use it for the following:
- Remove: You can withdraw part of your cash value. This can reduce the death benefit and you could potentially be taxed on the gains.
- Borrow from it: You can get a low-interest, no-credit-check loan from your cash value. There is no fixed maturity date, but your policy may expire if the loan exceeds the cash value.
- Surrender of the policy: You can receive your full cash value minus the surrender charge if you surrender their policy. Keep in mind that any winnings may be subject to tax.
3. End-of-stay costs insurance
End-of-life expense insurance is a small, whole-life insurance policy designed to cover end-of-life expenses, such as funeral expenses or unpaid medical bills. These policies have smaller death benefits and lower premiums than standard whole life policies. Final expense insurance also doesn’t require a medical exam, making it an easier life insurance option for people in good health.
4. Universal life insurance
Universal life insurance is a type of permanent life insurance policy. It offers adjustable premiums and death benefits, and the cash value increases with current interest rates. Once you’ve accumulated enough cash value, you can use it to pay some or all of your premiums.
How to choose the best life insurance policy
There are several types of life insurance policies, and each can meet different customer needs. Term life insurance may be better suited for those who don’t need guaranteed lifetime coverage and want to save on premiums. And permanent policies like whole life, final expense, and universal life may be a better fit if you need guaranteed lifetime coverage or have complex financial goals.
To choose the right life insurance policy for your needs, it’s important to weigh your current situation and your financial goals. Then, be sure to shop around to find the coverage you need at a rate that fits your budget.