The Two Types of Life Insurance

Life insurance is important, to say the least. It can help to secure the well being of your loved ones in the time of your passing – especially if this is unexpected. It can help to cover the costs that are associated with lost wages and grieving time as well as assisting in repaying any debts that may become unmanageable with one income that a death in the family can bring.

Before applying for life insurance, it is important to know the types of insurance that are available to you and the avenues that you should take when considering each of these options. Of course, there are advantages and disadvantages to each.

There are two types of life insurance that are commonly applied for:

Term Life Insurance

Term life insurance is a life insurance plan that lasts for a set amount of time in which the premiums are paid. The terms of this type of life insurance last an average of five to twenty years and the premiums are locked in through the term of the entire life insurance policy.

There is no cash value which is accumulated through the life insurance term. In the event of the death of the applicant, the value of the life insurance policy is paid to the beneficiary of the policy.

Depending on the face amount of the life insurance package (the amount that will be paid to the beneficiary on the death of the policy holder) the premium per month is calculated using specific formulas for the risks that are associated with the life insurance premiums. This is combined with the length of coverage term to decide the life insurance premium that will be paid to the insurance company on a monthly basis.

The younger and healthier the individual the lower the insurance premiums per month. Therefore, the younger that the individual is upon the time when the insurance is applied for, the lower the cost of the premiums will be when these prices are locked into the term of the life insurance plan.

Whole Life Insurance (Permanent Life Insurance)

Whole life insurance is also referred to as permanent life insurance and accumulates funds through the term of the life insurance plan. The policies remain in effect for the entire term of the life insurance and accumulate as an investment. Money can be borrowed from the fund through the life of the term and paid back over time.

Whole life insurance is often compared to an investment as the policy matures and pays out the certain amount to the applicant. This type of life insurance can also be surrendered and the applicant can receive the cash value of the life insurance fund.

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