Insurance 101: Types of Life Insurance

In honor of Life insurance awareness month, we are doing an easy to understand series on life insurance. Not sure what the difference is in the various types of life insurance? This breakdown is for you.

What is life insurance?

Life insurance is an agreement between a life insurance provider and an individual to pay a death benefit upon the death of the insurance, in exchange for a series of premium payments from the policyholder.

What are the types of life insurance?

Term Life Insurance:

  • Term life insurance is titled so because it provides a death benefit for a specified period of time, the “term”
  • It does not provide permanent coverage but it typically has the lowest out-of-pocket cost

Whole Life Insurance:

  • Whole life insurance is permanent coverage
  • The premium is guaranteed to never increase and the death benefit is guaranteed for life
  • Whole life also has a cash value component that builds value and can be accessed for various needs
  • It may also pay dividends to policy holders

Universal Life Insurance:

  • Cost of insurance is deducted from the policy’s cash value
  • Can provide permanent coverage for the life of the insured
  • Gives the policyholder a bit more flexibility on the timing and amount of the premium payments
  • It comes in two forms:
    • Current Assumption: Bases policy performance of interest rates available in the financial markets and on a company’s current mortality experience.
    • Death Benefit Guarantee:  Has a guaranteed death benefit and continued low interest rates.

With all of the resources and information out there, learning about what type of life insurance is best for you can be confusing and a bit overwhelming. If you’d like to first find out how much you need, check out our calculator here.

 

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    Nicci Troiani

    Nicci is the Social Media Manager at IGO, she started working with IGO in 2011 and manages all of our social media platforms and blog. Nicci now lives in Las Vegas and works for IGO remotely. She lives there with her husband and her cat, Princess.