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Types of Life Insurance Policies

In days gone by, life insurance used to be simple. You figured out how much death benefit you needed, and then you chose between term and whole life.

The life insurance industry has gotten a whole lot more complicated in recent years. Besides term and whole life (now often called "permanent life"), there are universal policies ... even a new type of term life called "return of premium." How can you weigh your options and decide which type is right for you?

Term Life Insurance: An Overview

This article introduces you to the concept of term life insurance.

Term life insurance is often referred to as "pure insurance" because its premise is very simple: You pay a premium to an insurance company in exchange for their promise to pay a death benefit to your survivors if you die while the contract is still in force.

Term life insurance provides protection for a specified period and is usually renewable at the end of each period at progressively higher premiums. As you get older, your risk of dying increases, so the cost of term insurance goes up. Term insurance carries no cash value element, making it less expensive than permanent alternatives.

Annual Renewable Term

Annually renewable term, or "ART" (sometimes called yearly renewable term, or "YRT"), is an example of a term insurance policy that has a constant face value and premiums that are adjusted upwards each year to reflect the increasing probability of your death in any given year.

Decreasing Term

Decreasing term insurance refers to a type of annual renewable term life insurance policy with a decreasing death benefit (face amount) and level premiums. Decreasing term is ideal for insuring a liability that is gradually being paid off, like a home mortgage.

Level Term

If you prefer, you may select a "level term" policy which guarantees that you will pay the same annual premium for a set number of years (usually 5, 10, 15, or 20) for the same amount of death benefit. The longer the guaranteed term, the greater the initial premium, but the longer the premium stays fixed. In most cases, if you know you will need your term insurance for an extended period of time, a level term policy will prove less costly than an annual renewable term policy.

Return of Premium

A relatively new type of policy, "return of premium" life insurance provides the benefits of traditional term life while the policy is in force, and then at the end of the policy period, pays back all the premiums you have paid. The catch, of course, is that you must still be alive to collect your premiums.

Permanent Insurance

As the name implies, permanent (cash value) insurance is best suited for the individual with a long-term (often indefinite) need. A permanent policy is really a combination of "pure insurance" and an asset accumulation element. Premiums are considerably higher than term rates in the beginning years, but may drop significantly, or even disappear, in later years. Other differences may include an increasing death benefit, and a "cash value" associated with the policy.

Whole Life

A whole life insurance policy covers you for as long as you live, as long as you make premium payments. Usually, this type of policy has a level premium for the life of the policy. Initial premiums are generally high compared with term insurance premiums, but eventually they become lower than the premiums you would pay if you had kept renewing a term policy. Over time, a whole life policy builds cash value at a rate of interest set by the issuing insurance company. Let Roswell GA Life Insurance help you decide which type of life insurance is best for your needs.

Universal Life

With universal life insurance coverage, which also covers you for as long as you live, you can vary your premium payments and the face amount of your coverage. Most of your premium payment goes into an account, which earns interest. You may borrow against the cash value, but eventually, if the balance continues to drop, your coverage will end. To prevent that, you would have to start making premium payments again, increase your premium payments, or lower your death benefits. Generally, your policy will state that it will pay the premiums from the cash value of your policy.

Contact Us

Of course, your insurance needs will be determined by your individual situation. And keep in mind, the cost and availability of the type of life insurance that's right for you depends on factors such as your age, health, and the type and amount of insurance you need. If you are considering purchasing life insurance, Roswell GA Life Insurance recommends consulting us to explore all your options and determine the solution that best fits your unique needs.

Let TX Life Insurance Quotes .com provide you with a life insurance quote and help answer your questions. Fill out our simple online form to get started or call 1-877-221-6198 to get a quote and policy rates today.

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