Know Your Options For Life Insurance

Know Your Options For Life Insurance

Deciding to obtain life insurance is a wise decision to make, but often times it can be confusing for a layperson when comparing the different types of coverage in the market. Most people simply go for cheap life insurance quotes or policies they can afford. This is a mistake because life covers fit different financial needs. A wise approach when looking for life insurance is first to find out what options you have. Understanding the different kinds of life policies can help you choose the best plan for your current situation.

Types of Life Insurance

In general, life insurance types are of two groups: temporary and permanent. Apart from these options, there are more sub-categories. However, the main types of life coverage that most carriers offer include the following.

  • Temporary life insurance
  • Permanent life Insurance
  • Whole life cover
  • Universal life insurance
  • Endowments
  • Limited pay life cover
  • Accidental death covers

What do Different Life Insurance Covers Entail?

Term assurance is the most common type of temporary life insurance. This policy is only valid for a limited term and is subject to fixed premiums. Premiums only assure payment in case of death during the life of the policy. Once term insurance expires, one can renew. Before obtaining term insurance, consider the premiums to be paid and length of coverage. Level term insurance attracts a fixed premium and can last anywhere from five to thirty-five years. Annual renewable term insurance is the most affordable plan, but premiums rise with age.

Permanent life insurance offers some of the best polices in terms of benefits. There are mainly four types of permanent life covers, which include whole life, universal life, limited pay, and endowments. Unlike term assurance, permanent life insurance cannot be terminated midway unless one does not qualify for application or defaults in making premium payments. These policies accumulate a cash value that reduces risk for the insurance company over time. Policyholders are also entitled to borrow money during the life of a permanent life cover since it comes with a cash reserve.

Whole or complete life coverage comes with a pay fixed premium value, which guarantees a good payout over a long period. Universal coverage is relatively new in the insurance market. However, this policy offers flexible payment schedules and premium amounts.

For limited pay insurance coverage, payment of premiums last for a specified timeframe, after which no additional payments are due. A typical limited pay cover may last between 10 and 20 years, and payouts are done at age 65. Endowments are similar to limited pay insurance in that premiums stack a cash value over a specified period. Payments are made at the endowment age regardless of whether the policyholder is alive or not. However, endowments are among the most expensive life insurance plans. Lastly, you can choose to take out an accidental death cover, which offers coverage in case of a fatal accident.

Learning what options you have for life insurance is the first step towards choosing the right coverage. Make sure also to compare quotes and terms of coverage before making your final choice on which life insurance policy to obtain.

James Finally is a researcher and writer who loves helping others learn about life insurance. Check out to find out where James gets affordable life insurance plans.