Life Insurance Types   no comments

Posted at 12:00 am in Different types of insurance

In many cases, an individual has to decide whether or not they will choose to carry life insurance. What many people do not realize is that life insurance can be broken down into three main categories: term, whole, and return of premium. The basics coverage of all three types is the same; however, the investment of each of the three types of life insurance are different.

Term life insurance is the most basic types of insurance. An individual would pay a specified amount of money for a determined amount of time. This monetary amount would not change over the life of the term. Twenty or thirty years are the two most common term periods. At the end of the term, the insurance would terminate unless it is renewed. No cash value is accrued with a term life insurance plan; however, it is the most inexpensive monthly plan.

Whole life insurance does not have a specific term agreement; this type of insurance can continue until death. The whole life insurance premiums are generally substantially higher than a term life insurance policy. The main investment difference is that whole life insurance accrues cash value. After having the policy for a specified amount of time, cash may be withdrawn against the policy. Upon death, whole life insurance tends to have the best benefits.

A return of premium life insurance policy is a relatively new concept. It is much like a term life insurance policy in that it is only good for a specified amount of time. At the end of the term the policy is ended unless it is renewed. A return of premium policy, however, tends to be close to double the cost of a regular term life insurance policy. If the individual dies before the term is fulfilled, it would be essentially the same as just a basic term insurance. If the individual is still living, however, they would receive back everything they have paid in premium costs.

For those who are disciplined enough to save, a term policy is generally considered the best investment. Because it is less expensive, the difference can be invested at higher rates. For those who do not save, one of the other two options might be the best. Whole life has very low rates while a return of premium policy has a 0% interest rate. At the end, however, there is money being returned.

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