The Advantages And Disadvantages Of The Different Types Of Life Insurance
When scouting around for the best quotes, it is important to differentiate between the types of life insurance. The differences can be very big, such as the length of the term, or the amount of the premium. Others are actually very related to each other, except for a few minor changes.
There are two major types of life insurance: the term and the permanent. The term is a class on its own among the types of life insurance in that it is active for a very specific period of time. The shortest period is five years, while the longest is thirty years. Carriers will let you select the duration of your policy, provided it's between five and thirty in five year increments. There are other types of life insurance that extend up to thirty five or forty years, but these are rare.
One advantage this has over the other types of life insurance is that the premium or the monthly payment is much lower. This is because the value of the policy does not accumulate, unlike those of the other types of life insurance. Instead, the face value is what's stated in the contract, and this does not change, even if you've completed all premium payments. In addition, you are not eligible for benefits if the term has lapsed. So if the owner dies after the time period, and the contract was not renewed or converted, the family receives no benefits.
While you can renew the term, a better option would be to convert it to one of the other different types of life insurance. The most common of these types of life insurance is the whole life plan. Here, you are protected the entire time, and whether the inevitable happens a year from now or fifty years from now, your family will receive the funeral benefits that they deserve. This is a good way to ensure the future of your growing family, although the premium is a bit higher.
Unlike the previous types of life insurance, the face value increases over time. One part of the policy is set aside for funeral and other immediate expenses. Another part is for your own growing account. Once enough has been accumulated for the burial, you can start increasing the funds in the plan, making it unique among the other types of life insurance.
Almost all companies also allow you to borrow against this fund. You're actually taking back your own money, but you will need to pay it back to increase the value. Most companies aren't very strict about this, but paying back ensures a larger pay-out at the end compared to other types of life insurance.
If you would like to choose the types of life insurance that allow for more flexibility, go with a universal plan. Here, you're allowed to choose sub-accounts that can influence the growth of your fund. In the best situations, you will see the fund grow faster than the versions discussed above.
A few companies offer variations among these plans, with semi-term and conversion options available. In order to choose the best one, assess your present condition and future needs and see which of the types of life insurance best suits your lifestyle.