What Are the Different Types of Available Life Insurance Policies?
There are two primary types of life insurance: term and permanent life insurance. However there are different versions of each life insurance type. Buyers should understand the differences to assure they select the proper insurance for their needs.
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Term Life Insurance
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Term life insurance is an insurance policy that provides a death benefit for a specific number of years. Term policies are sold by different companies with various terms such as 10 and 20 year policies. At the end of the term the insurance policy expires.
Permanent Life Insurance
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Permanent life insurance varies from term life insurance in two basic ways: permanent life insurance does not expire and it also has a built-in savings and investment account. The insured can often borrow against or cash out the money in the savings account.
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Common Variations
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Some term life policies allow the insured to extend the term or convert the policy into a permanent life insurance policy before the initial term expires. There are three common variations of permanent life insurance: whole, universal and variable. Whole life provides a fixed premium with an investment account and sometimes pays returns as dividends. Universal life insurance offers a flexible premium and a guaranteed return (usually from bonds or mortgage investments) while variable life offers a fixed premium with more investment choices.
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