While shopping for life insurance policies, there are a few different options to choose from. Some life insurance policies have an expiry date, while some last until death. Depending on your circumstances, you can choose from a few different types of life insurance policy.
Term Life Insurance
Policies with a set term of cover are known as term life insurance. The most common terms have an expiry date of five to twenty-five years. These policies are often the most affordable. Term life insurance is usually available as level term insurance, for which premiums are guaranteed to remain level throughout the term of insurance, or as decreasing term insurance, for which coverage decreases at a predetermined rate over the term of the life insurance. Term life insurance policies generally only pay out death benefits, rather than allowing customers to cash out all or part of their policy.
Permanent Life Insurance
As the term suggests, a permanent life insurance policy lasts your whole life. There are a few options available.
- Whole Life Insurance: This is the most common type of permanent life insurance policy. Along with lifelong coverage, it may be possible to cash out all or part of these policies. These policies are often sold as an investment option as you can withdraw some money and also borrow against the policy. While the premiums remain constant, it usually costs about ten times more than term life insurance.
- Universal Life Insurance: Almost identical to whole life policies, universal life insurance has some added benefits like changeable premiums and death benefits.
- Variable Life Insurance: This is another life-long insurance option, in which the cash value of your premiums goes into different investment funds. Because they are tied to investments, these policies can be a risky option, although they can also be lucrative.
In addition, there are less-common options, such as variable universal life insurance, simplified issue life insurance and family income benefit insurance.