What are the different types of Life Insurance and which is best for you?
First, let's look at what types of Life Insurance that is available for you.
The main policies that are offered are Whole Life, Term Life, Universal, Indexed Universal Life and Return of Premium. The type of policy that is best for you depends on your needs and budget, I will briefly go over some of the characteristics of each.
Whole Life: This is one of the first types of life insurance to be sold. It is a policy where you pay the insurance company a premium that will stay the same unless the face amount is changed. The insurance company will use a percentage of the premium to cover the liability of the policy, the rest they will place in guaranteed investments and a portion will be used for cash value that increases during the policy and is available for the policyholder for loans or a buyout of the policy.
Term Life: A Term Life policy is a life insurance policy that will last for a certain term, such as 5, 10,15 or high as 30 years. This is the least expensive type of policy and is used by people who want to get inexpensive coverage while they need it most. The policy payment will stay the same throughout the term period, but increases dramatically after the term. In some cases, the policy will expire after the term.
Universal or Indexed Universal Life: This is also a policy that will last all or most of the insureds life. It is similar to Whole Life, except that the policy payments are more flexible, meaning that the payments are added to the policy and can be used to make premium payments and they are usually added to the face amount of the policy in the event that the policy has to be paid. The Indexed Universal policy is attached to a policy or stock index, usually with a guaranteed minimum and maximum interest payment.
Return of Premium: The ROP policy is a form of term policy where the money that is paid into the policy is returned to the purchaser, usually in full, if the policy doesn't pay a death benefit. This policy will have a higher face amount for the same premium as a Whole Life or UIL, but a smaller face amount than a term policy.
Summary: There are many different types of policies with many different companies. Being a life insurance broker that isn't a captive agent, I can give you options from many different companies, without any additional expense.