Life Insurance: Buyer’s Guide

Life insurance is never a fun topic of discussion as shopping for a life insurance policy can be confusing and force one to think of his or her mortality. However, almost everyone will agree a life insurance policy is a must-have item. It will give you peace of mind today and your loved ones financial security later. So with such an important purchase, don’t you think you ought to put a decent amount of research into your search for the best life insurance policy for you? It may seem an intimidating and even depressing task, but it is an invaluable one. So to make things easier, here is a basic guide to the types of life insurance available so you can know what you’re a good candidate for.

While every insurer will have different nuances that go along with the policies they offer, these four types of life insurance won’t change all that much from company to company.

1. Term life insurance

Term life insurance is essentially a short-term policy – or at least it can be. You will pay for the term life insurance coverage over a certain period of time and if you die during that period, your beneficiary will receive the policy’s value. Unlike other life insurance policies, you aren’t making an investment.

2. Whole life insurance

With a whole life insurance policy, you are buying a policy that will cover your entire life span, rather than a certain period of time (like in term life insurance). The premiums on this policy will be stable and the money you put into your policy will be only partially invested.

3. Universal life insurance

With a universal life insurance policy, you will have added flexibility. You will have a minimum premium and you can choose how much more than that you want to pay. Then you can invest that money into bonds and/or mortgages (typically). Whatever your returns are on your investment, you can then use that for your premiums or you can invest the returns even further. For some policies, your returns will go toward the value of your policy. With others, the beneficiary gets the original value of the policy plus the returns on top of it (as cash value); with the latter form of investment, the inflation doesn’t have an effect but the premiums tend to gradually increase as you age.

4. Variable life insurance

A variable life policy allows even more flexibility than a universal life insurance policy. You can invest your money into more vehicles – like the stock market. Other than that, a variable life insurance policy is very similar to a universal life insurance policy.

There is also a combination of both variable life and universal life insurance that you may want to look into.

Hopefully, now that you understand some basic terms, life insurance isn’t nearly as scary or elusive or confusing as it once was and you feel better equipped to find a policy that’s just right for you and your loved ones.