What are the different types of life insurance?
Here are the most common types of life insurance.
- Term life insurance: A policy is in effect for a set number of years, such as 10, 20, or 30 years. Premiums are affordable, and the death benefit is paid only if the policyholder dies during the coverage term. There’s no investment component or cash value.
- Whole life insurance: A policy is in effect indefinitely while premiums are paid, and a death benefit is always paid. The costs are higher than for term life insurance but the policy accrues a cash value due to the savings portion of the policy. Policyholders are paid a fixed rate of return. They can borrow against the value of the policy or cash it out.
- Universal life insurance: This is a type of whole life insurance that offers more flexibility than whole life policies. It also accrues a cash value. Policyholders can adjust the amount of their death benefit. While there is a minimum guaranteed rate of return, the exact return on investment (ROI) is not guaranteed and depends on market conditions.
- Variable life insurance: This is another type of whole life insurance. The policy remains in effect indefinitely, and a death benefit is always paid. The cash value, however, is variable and no rate of return is guaranteed.
- Guaranteed issue: Some insurers offer life insurance policies with a low amount of death benefits that anyone can qualify for without a medical exam and regardless of health status. These policies are also called “final expense insurance” because they can be used to cover funeral expenses.
What does a life insurance policy typically cost?
The life insurance cost can vary depending on policy type, age, health status, and whether someone is a smoker. Average costs of a term-life policy could be around $30 per month if purchased as a healthy young person or could be over $1,000 per month for an older smoker.
Whole life insurance premiums could be between five and 15 times greater than term life policies for coverage with a comparable death benefit amount.
Life Insurance Best Of Selections
Before you commit to a life insurance policy, take a look at our lists of some of the best options out there:
