Types of Life Insurance

Term life insurance covers beneficiaries during the length of a term. This term can range from as little as 6 months and up to 30 years. This type of insurance is only temporary with no cash growth, which is partly the reason the premiums for term life insurance are usually much less expensive than permanent life insurance. If a term life policy runs out of the time specified, another policy must be purchased. If a policyholder dies while the term life policy is still in effect, the beneficiaries receive the payments.
Whole life insurance is a permanent life insurance policy which guarantees the payment of benefits to beneficiaries after the benefactor’s death as long as the premiums are paid. Whole life insurance also has fixed premiums that remain the same over the policy’s lifetime. A portion of the premiums can also earn interest over time, so there is cash growth.
Variable life insurance is also a form of permanent life insurance. The premiums paid for variable life can be used in a wide range of investments including stocks. Extra money received from these investments can add to the value of what the beneficiaries will receive. This type of insurance does provide guaranteed benefits similar to whole life but comes with higher risks.
Universal life insurance places less emphasis on cash value and takes the premiums and puts them in low risk investments like bonds or money markets. It provides permanent coverage and flexibility by allowing a person to take out a loan on their policy or pay smaller premiums.
Survivorship life insurance is permanent life coverage designed for two people. The beneficiary does not receive any money until both of the policyholders have died. The money received can be then used for estate taxes. This type of insurance is usually cheaper than two separate life insurance policies.
Cash value is the term for the amount a permanent life insurance policy is worth over time. Life policies — such as whole life and universal life — gain cash value from the premiums paid, which can earn interest and be invested in the stock market. Insurance polices that can earn cash value are usually permanent.