What are the Different Forms of Life Insurance?
By USInsurance.com Staff
We already know that we all need life insurance. When meeting with life insurance agents you will hear a lot about different insurance plans and terms of conditions — depending on the form of protection you seek. Here is a listing of what’s what in life insurance so that you can make the best choice for your needs.
Term Life Insurance: The simplest and least expensive type of life insurance policy, term life insurance is where a policy holder purchases a plan for a fixed cash-value that covers a specific amount of time (up to 30 years). Within this plan, the beneficiary of the account does not receive a cash value, nor does the amount accrue any interest over time.
Whole Life Insurance: A permanent form of life insurance, this policy creates a cash value for a beneficiary that is managed by an insurance company. The account is established by setting up a fixed-rate whose premium won’t increase over time (as long as the set amount is paid on time). Through this account, policy holders can also receive dividends, borrow money and withdraw funds tax-free.
Variable Life Insurance: This permanent protection is generally used for a high-risk policy holder such as an individual who is ill. It allows more flexibility and provides a low-risk, tax-free policy to the beneficiary. Through this plan, the policy holder can borrow money; however the money in the account cannot fall below a certain amount.
Universal Life Insurance: This form of life insurance provides permanent protection for your dependents that also offers premium and face value flexibility. Similar to whole life insurance, universal allows for a higher opportunity on the cash-value, meaning more funds for the beneficiary; however this plan has higher fees. This plan allows policy holders to invest, borrow and withdraw funds from their accounts.
Universal Variable Life: This account gives the life insurance policy holder the most control of their account through a mutual fund account. Although the return of the funds can potentially be sizeable, there are no guarantees beyond the original face value of the account. Insurance holders can also make withdrawals or borrow and they can also invest in money market accounts, stocks and bonds.
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