Types of Life Insurance

There are many different types of life insurance. All of them will fit into two broad categories: Permanent and Term. They can be compared to owning or renting a home. If you buy a home you become the owner even if you have a loan on it. You make your payments and increase the value of your ownership. If you have permanent life insurance you increase the cash value as you pay your premiums. If you have term insurance you pay your premiums like rent, and you have the death benefit protection. At the end of the term the coverage ceases, and you pay no more premiums.

Term Life Insurance

The main attraction of Term Life Insurance is the low cost. Term Life is issued for a specific term, the shorter the term the lower the cost. At the end of the term the policy protection ends. It may have provisions that guarantee the insured that another term can be purchased at a higher rate or converted to permanent insurance which may require that the insured meet certain underwriting qualifications. Length of terms can be ten, twenty and thirty years. Some companies even allow the applicant to choose any number of years. Decreasing Term Policies used for mortgage protection are designed to have the death benefit decrease to correspond to the balance of the mortgage.

Permanent Life Insurance

As the name implies, these policies are purchased with the intent to keep them for life in most cases. This type of Life Insurance accumulates cash values which can be accessed if needed by making a policy loan. The owner can repay the loan, or the loan can stay in place until the insured dies at which time the loan amount with interest would be deducted from the face amount of the policy. Types of permanent life insurance are known as Whole Life Insurance, Universal Life Insurance, Variable Life Insurance and Equity Indexed Life Insurance.

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Term Life Insurance
Universal Life Insurance
Whole Life Insurance
senior market advisor Article added 08/16/2011  by Amber Douglas
Senior Market Advisor: Morgan White Group

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