The sheer number of life insurance policies available to you can be confusing. This full article is intended as a brief but comprehensive guide to the major types of life insurance. Basically, life insurance policies are classified in two major types, which themselves have subcategories:
1. Term Life Insurance
This is the insurance type that usually comes in 20 to 30 year durations. The policy arrangements: claims can only be filed when the policy holder dies during the duration of the policy. Term life insurance subcategories are
a. Annual renewable—allows you to have the best term arrangement available considering your age and income. You renew your terms every year and your premium increases upon every renewal.
b. Level term— offers coverage options from 5 years to 35 years at most. While claims can only be filed should the holder’s death occur during the duration of the term, this type of insurance allows policy renewals or policy upgrades to the generally more valuable permanent life insurance.
2. Permanent Life Insurance
Where the previous insurance type runs only for the span of its duration, permanent life insurance runs throughout the lifetime of the policy holder. This is the type that accumulates the most value. Three subcategories fall under permanent life insurance:
a. Whole life —the option that insurance companies claim to be most sustainable. This is because it comes with leveled premiums or premiums that are most predictable during the duration of the policy, which is until the holder dies, while giving the assurance of death benefits, policy loans and even increase in claims through dividends.
b. Universal life — basically whole life coverage with flexibility. Should the policy holder seek adjustments in the current arrangements of his policy, his insurer will be able to come up with agreeable amendments. Normally, these amendments result in lower, more bearable premiums but will in return result in decreased death claims and monetary benefits.
c. Limited pay—offers fixed death benefits the value of which depends on the paying period chosen by the policy holder. It normally incurs a fixed premium that needs to be paid, (for instance, 20 years) but the holder gets lifetime coverage.
The above five examples are the major life insurance options available. Be keen when choosing which one will best suit your needs and particular circumstances, and be particular when choosing an insurer with which to trust your money and your life.