What Are the Different Kinds of Life Insurance?

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There are many different kinds of insurance for you to choose from depending on your needs. Find out about the different kinds of life insurance with help from a personal finance expert and professional in this free video clip.

Part of the Video Series: Personal Finance & Life Insurance
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Video Transcript

Hi, this is Walter Pardo. I am managing director and founder of Wealth Financial Partners and WFP tax partners in Basking Ridge, New Jersey. Today's, topic is what are the different kinds of life insurance. Life insurance really comes into two categories. You have what's called term insurance, and you have permanent insurance. In discussing term insurance, we really have to understand that term insurance is less expensive, and it's for a set period of time. Ten years, 20 years. Usually a person has term insurance just for a certain period of time, but when you really need it at age 70, the price goes up. Now permanent insurance is more of a cash accumulation vehicle. There are three different types of cash accumulation permanent insurance policies. The first one is really whole life insurance. The second one is universal life and the third is variable universal life policies. So in all those three, you have some cash accumulation. Whole life is predominantly one interest rate for the rest of its term and there's really no growth per se except the interest that it dividends. Universal life can be tied into an interest rate or some kind of an indexing vehicle. The variable universal life can be tied into sub accounts which are like mutual funds. Where it increases based on the performance and sometimes if it does really, really well, based on the performance of the markets and the sub accounts, you don't have to even pay your premiums. So on the other side of that, is if the markets go down then you're going to have to pay maybe a little bit more to keep that policy in place. So you really have to weight what your needs are and you have to understand what your products are. I still say that life insurance is really for the death benefit, not for the cash accumulation. I know some people differ from that opinion, but at the end of the day, where there is a need, you hope there is life insurance to cover it.


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