Life insurance is a policy that provides financial protection to your loved ones in the event of your death. It’s designed to pay a lump sum (known as the death benefit) to your beneficiaries to help them cover living expenses, debts, and other financial needs.
the main types of life insurance:
Here are the main types of life insurance:
-
Term Life Insurance:
- Provides coverage for a set period (e.g., 10, 20, or 30 years).
- If you pass away during the term, your beneficiaries receive the death benefit.
- It’s generally more affordable than permanent life insurance but doesn’t build cash value.
-
Whole Life Insurance:
- A type of permanent insurance that lasts for your entire life as long as premiums are paid.
- Builds cash value over time, which you can borrow against or withdraw.
- Premiums are typically higher than term life but offer lifelong coverage and a savings component.
-
Universal Life Insurance:
Advertisement - Also permanent life insurance, but with more flexibility than whole life.
- You can adjust the premium payments and death benefit amount.
- It also builds cash value, but the interest rate may vary based on market conditions.
-
Variable Life Insurance:
- A permanent policy that allows you to invest the cash value in a variety of options (stocks, bonds, mutual funds, etc.).
- The cash value and death benefit can fluctuate based on the performance of those investments.
-
Final Expense Insurance:
- A smaller, permanent life insurance policy meant to cover funeral expenses and other end-of-life costs.
- It’s typically easier to qualify for, with lower premiums.
Key Factors to Consider:
- Coverage Amount: Think about your family’s financial needs, including debt, living expenses, and future goals like college tuition or retirement.
- Premiums: Choose an amount that fits within your budget, as premiums can vary greatly depending on the type of policy.
- Beneficiaries: You’ll designate who will receive the death benefit, typically a spouse, children, or another close family member.
- Riders: You can often add additional coverage options (called riders) for things like disability or critical illness.