Life insurance, its all about transferring any risk that
could occur and that would have a direct impact on your life/living or
existence.
Have you been considering having a life insurance plan? And confused
which life insurance plan would be perfect for you. Then, this article will
walk you through the different available life insurance policies that you can
choose from.
Below I discussed the different types of life insurance
plans there are, read it through and see which of the plans that suits you the
most, then you can go for it.
The different types of life insurance includes:
1. Whole life insurance
2. Term life insurance
3. Universal life
4. Variable life
5. Variable universal life
Whole life Insurance.
The whole life insurance policy is meant to be
effective throughout an insure lifetime. Another name for whole life insurance is “cash
value life insurance”.
whole life insurance is a permanent life insurance that has
so many benefits.
One of the benefits include;
payment of a the total tax-free
death benefit to the insurance beneficiary at the time the policy holder passes
away. whole life insure provides a policy cash value, which is made available
to the policy holder while he’s still alive.
On the other hand, Whole life insurance is far more
expensive than term life insurance.
Universal life
insurance
It is related to the whole life insurance policy, only that
there is a potential for higher earnings on cash value balance.
After the death of a universal life policyholder, his
beneficiaries are entitled to receive a tax-free death benefit; this death
benefit is calculated based on the amount of premiums paid in the duration of
the policy.
Universal life policies offer a high flexibility in the
payment frequency, the amount of premium to be paid and the level of total
death benefit to the beneficiaries.
Also, if a policyholder could maintain his contract for a
year, the subsequent years after the first year a policyholder can either
decrease, increase or skip his premium payments, provided the available cash
balance is sufficient to cover all policy expenses.
Term life
insurance
Term life insurance
is an insurance policy meant for a specific period of time such as five, ten or twenty years term.
Term life insurance is a temporary life insurance coverage,
because, the insurance plan is for a duration of time not for life long as the
whole life and universal plan .
In case a term life insurance policyholder should die at the
time when the insurance policy is still active, his beneficiary is entitled to
receive the total death benefits, which will be a tax free payment made to the
beneficiary.
Variable life insurance
Variable life insurance is also a permanent life insurance,
which will be in effect till the death of the policyholder.
Variable life insurance premiums are fixed like they are with
whole life policies, but cash value balances and death benefits fluctuate.
Variable life insurance cash value balances are invested in
various tax-deferred subaccounts provided by the insurance company. The
policyholder would make a selection from the various available investment
types.
The risks associated with the subaccount performance will
reflect on the policyholders death benefits.
As the benefit value will increase
is the subaccount yields very well, and the benefits reduces if otherwise.
The premiums paid by policyholders of variable life
insurance are similar to the premium paid by universal life insurance
policyholders.
Variable
universal life insurance
Variable universal life insurance coverage is a combination
of universal life and variable life insurance policy in one insurance contract.
Policyholders have flexibility in premium payments and
frequency. Due to these
flexibility, variable universal
life policyholders have to pay slightly
higher premiums than both the universal and variable life policyholders.
However,
the premium paid by variable universal life policyholders is lesser than the
whole life policyholders premium.
With a variable universal life insurance plan, you can create
a custom policy that suits specific insurance needs for the long-term.
It is equally good to note that in a variable universal life
insurance, both death benefit and total cash value can rise or fall over time.
In conclusion, having a life insurance cover is part of a
wise financial planning, however be mindful of the different types of life
insurance policies that are available. This different life insurance types
differs in term of total death benefits, time frame, opportunity to take risk
of having a cash value subaccount within the policy,.
It is now up to you to decide which type of life insurance
would be appropriate for you based on your circumstance and needs.
