Life insurance is a contract drawn up between two parties: the provider and the client. The former promises to pay monetary benefits to the beneficiaries of the latter’s estate post their death. This policy is essential because it protects your family from financial difficulties caused by your demise.
Although there are several types of life insurance policies to choose from, you may be influenced by various factors such as financial capability, premium rates, and length of coverage.
Let’s examine the different types to help you determine the right type of life insurance for your specific situation.
Term Life Insurance
This coverage plan is a temporary one that lasts up to an agreed period. It is an affordable option with lower premium rates than permanent plans. It is a high-risk investment because it becomes worthless after the expiration date, and all the premiums are lost. If the client dies within the agreed time, cash benefits are paid out to the beneficiaries. This is not a savings plan, which means the cash value does not accrue over time. This policy is ideal for clients struggling with tight finances where the insured person has a low life expectancy that increases his likelihood to die within the agreed period.
Most term policies offer between ten to thirty-year terms. This policy may be too easy for clients battling life-threatening diseases like cancer; hence, the provider often calls for a medical examination as part of the application process for term life coverage. This policy is also known as a medically underwritten term insurance (for a full examination) or no-exam-life insurance (that is not fully medically underwritten).
If you’re in good health, a medically underwritten term life policy could be one of the most affordable life insurance options out there. It will be inexpensive because the risk is high on the client’s part and low on the company’s part. A no-exam-life policy is likely to be more expensive because the life provider company doesn’t know enough details about your healthcare records or risks. Your provider may limit the amount of coverage you can get and increase the cost of your premiums.
Whole or Permanent Life Insurance
Whole life insurance is a type of permanent life insurance policy. It covers the client from the time of purchase until his death, which can be at any time. The premium rates are significantly higher than a term policy. Reports have shown that the permanent policy rate is five to fifteen times more than the premium for a term life policy. This plan offers many advantages to the insured, including savings, annual dividends, and borrowing. The money is tax-free, meaning all the transactions made do not attract charges. The cash value accrues over time, provided that you continue to pay your premium until your demise.
There are three types of permanent life insurance:
- Variable insurance: This plan allows you to invest the cash value of your policy, which may cause it to increase or decrease.
- Universal: This policy features flexible payment options like using your cash value to pay premiums. You will also be permitted to pay more than your premium rate per month to boost your cash value.
- Guaranteed: This plan covers payment only for your final expenses. It has a high premium rate with a low death benefit.
Understanding the different types of life insurance will help you make more informed choices while purchasing your life insurance plan. Do you have additional questions about your life insurance coverage? If so, then contact the experts at Randy Jones Insurance Services in Pleasanton, California. Our dedicated team is eager to assist you with all your personal insurance needs today.