Types Of Life Insurance For Consumers

There are only three major types of life insurance that are specifically designed for consumers. These three types of life insurance are Whole Life, Term Life and Universal Life.

A life insurance policy pays a death benefit, called “Face Value”, benefits to the beneficiary upon the death of the person insured – or when the policy matures, whichever comes first. The latter, in the case of  “Whole Life” type of insurance policies. When the policy matures it will go to the owner, assuming the owner is still living.

Other than the insurer, there are three basic parties involved in life insurance contracts; the Policy Owner, the person Insured and the Beneficiary or Beneficiaries in the case of more than one person being named as such on the policy. For example, this can happen in the case of the last surviving parent leaving the proceeds to be divided among their children.

The Owner controls the policy and makes all of the decisions about beneficiaries, borrowing the cash value, selecting the type of settlement options and pays the premium, ect. The Insured is the person whose life is covered and the beneficiary receives the proceeds from the policy when the insured person dies from a cause covered under the policy guidelines.

Here are a few of the most common types of life insurance policies:

Whole Life Insurance

Whole Life is a permanent type of life insurance in that it covers the Insured individual for their entire life, up to the age of 100 years. There are two basic types; Continuous Premium Whole Life or “Straight Life”. There are also limited payment plans in which the premium is paid for a limited period of time. Example, 20 years would be called “20-Pay Life”. You would pay a higher premium for the 20 year period, but would then be finished paying for the policy.

Term Life Insurance

There are several different types of term life insurance policies available. Term Life policies provide “pure” insurance protection for a specified period of time. Example, 10-Year Term. Term life is considered “limited period coverage”.

A Term policy pays the “Face Value” on a contingency basis. The insurer only pays Face Value contingent upon the insured’s death during the term of the policy, the Face Value is not paid after the policy lapses or expires. Note: “Face Value” is the actual amount that you’re paying for the policy to cover. Example, a $100,000 policy would have a Face Value of $100,000.

Term Life is the lowest cost insurance and is designed for those individuals with limited resources available. It also provides more Face Value coverage for a given dollar premium than any other type of policy. Term policies can be expensive if purchased later in life. There’s also no cash value with Term Life policies. These provide the individual with only “pure” life insurance protection.

Universal Life

Universal Life is a policy in which part of the premiums are used to buy insurance protection and part are used as an investment into the cash value part of the policy. Universal Life is NOT a Whole Life Insurance policy. The Insured’s premium is paid into an “accumulation fund”, maintained by the company. This fund earns variable amounts of interest, according to money market type of interest rates. Universal Life also has a “flexible” premium. Universal Life Insurance is the only one of the types of life insurance that requires a “Securities” license to sell.

Health Insurance

Inexpensive health insurance options are also available.