There are different types of life insurance policies that cover you in different types of situations. Some policies are very straightforward and work like any other insurance: you pay a premium, and in case of your death, your dependent(s) collect. However, there are different types of policies that allow you to alter policy values depending on your performance.
Main Types of Life Insurance
- Term
This is the most straightforward kind of life insurance coverage. You pay premiums that will protect you for a set time period. If you don’t die within the time frame that was agreed on, the policy simply dissolves. With a ‘decreasing term’ the value of the policy decreases as you get older.
- Whole Life
If you purchase whole life insurance, it means that the policy will cover your for your whole life, as long as you pay premiums. This is a more expensive option than term life insurance, but obviously offers more long-term protection.
- Universal Life
Some insurance companies offer to invest part of your premiums into bonds or other kinds of investment accounts, and offer to pay beneficiaries in face value of the policy plus the value of the investment account. This means that the value of your policy can increase or decrease depending on the performance of the investment accounts.
- Variable Life
Variable life is similar to universal life, but usually presents policyholders with more options for investment, like stocks or bonds.
Most financial experts recommend people to sign up for term life insurance because it is the cheapest option that will get you the most coverage. The best you can do is to look at your personal financial situation: How much debt do you have? Do you have to pay off a mortgage? Do you have enough savings to support your family? The answers to these questions could greatly impact on what kind of insurance policy you choose.
It is also wise to talk to financial experts to get their take on your situation. If you are just looking for straightforward insurance, most experts recommend people to buy term life insurance as it is the cheapest option that gives you the most coverage. Nevertheless, this depends on your personal context and situation.
Use our insurance comparison tool to get free insurance quotes, and to find the best options for you. Before you talk to a dealer, make sure you have a clear picture of what your finances are like, and what goals you hope to achieve by purchasing life insurance.
