What every type of life insurance offers is tax-free death benefit that will be given to your beneficiary when you pass away. So, it is mostly about making sure your beneficiary can live well even when you are not around. Despite this common benefit, there are also many differences between life insurance types. What you need to do as clients is knowing all the types and their characteristics in order to choose the right one.
Term Life Insurance
Let’s start with term insurance. This particular type of insurance offers only death benefits. It allows the insurance holder to buy the most insurance coverage for the least price. As the name suggest, it has specific amount of term. For instance, if you purchase 20 years term insurance, your beneficiary will inherit the death benefit only if you die within the range of 20 years. However, if you can outlive the term of 20 years, your beneficiary will get nothing. But, before the term ends, the policy can be renewed for more years. Usually, this life insurance type is purchased by those who have currently been living with certain disease and are not expected to live that long. Or, it is also quite common for seniors who have never been purchase life insurance before.
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Whole Insurance
This type of life insurance is clearly different to term insurance. It doesn’t insure only specific term of your life but it insures your whole life as it is specially designed for covering the entire life of the insurers. Based on how it works, it is often called as cash value because you can actually borrow against or withdraw the money you have been investing after several years. However, the amount of return is not as big as other investment because the way insurance companies work is quite conservative. If you want to invest and insure your life at the same time, this type of insurance is the best option. It may cost you more for the premium as you should pay for it your whole life but the amount of return will also be bigger.
Universal Insurance
Are you familiar with universal life insurance? This particular type of insurance has flexibility as its key selling point. By flexibility it means that the death benefit can be increased or decreased depending on how you want it. You are the insurance holder can determine the amount of insurance premium and how much should go toward investment component. And, the amount of premium can also be increased or decreased.
Variable Insurance
The last type of life insurance is known as variable insurance. It is the only insurance allowing the insurance holders to invest cash value in various types of investment including money market funds, bonds and stocks within the portfolio or the insurance company. The investment’ performance determines the amount of cash value and death benefit. With these features, this life insurance is often considered as security. Moreover, only the prospectus can sell it. With these varying types, you can decide which one fits your need.
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