Knowing About the 6 Life Insurance Types Before You Buy

Did you know that there are 6 life insurance types to choose from? Before you buy, you should ensure that you understand how they differ, so you can invest in the one that best fits your family's needs. The following is a short description of each. Once you select the type that best fits your needs, then you can proceed and obtain a quote.

Term life insuranceTerm insurance is considered temporary insurance and has no cash value. Each year, you pay a premium that provides coverage in the event you die during that year. Upon your death, the insurance company pays your beneficiary the face amount of the policy. This is also referred to as the "death benefit." Term life insurance premiums usually increase each year, as you get older and the risk of death increases. This type of policy is also referred to as an annually renewable term (ART).

Return of premium term insurance (ROP) A newer type of coverage is "return of premium term insurance" (ROP). It offers low, term-like premiums along with a guaranteed refund of the premiums paid during the level term period. Obviously this assumes that the person insured is still living at the end of the level term. These ROP plans are available in 15, 20, or 30-year term versions. Because they are significantly less expensive than permanent types of insurance, consumer interest in these plans has continued to grow each year. Additionally like many permanent plans, ROPs may offer cash surrender values if the insured does not die.

To age 100 level guaranteedThis type of plan offers a guaranteed level premium to age 100. In addition, it provides a guaranteed level death benefit to age 100. Usually, this is accomplished within a Universal Life policy, with the addition of a a "no-lapse rider". Some of these plans also include a feature called an "extension of maturity." Essentially if you live to age 100 and have paid the "no-lapse" premiums each year, the full face value of coverage will be guaranteed at no additional charge.

Whole life insuranceWhole Life Insurance is considered permanent insurance. It remains in effect throughout your lifetime. It is good coverage if your needs remain the same over your life time. It will help to pay taxes and estate settlement costs. The premiums for a whole life policy usually remain the same throughout your life. When you first take out the policy, your premiums will be much higher than if you purchased a term insurance policy. However, the whole life insurance policy develops a cash value which you can access the policy's value either through surrendering the policy or borrowing via policy loans.

The whole life policy cash values include two components:* A guaranteed cash value, which grows during the life of the policy. This growth is based upon a pre-determined schedule which "endows" or equals the death benefit upon the policy's maturity.* A non-guaranteed cash value element, which is usually made up of "dividends" or "excess interest" which can enhance the value of the policy over time.

Universal life insuranceA Universal Life Insurance policy differs from Whole Life in that it distinguishes and itemizes the policy's protection, expense and cash value elements. By separating the three elements, builds more flexibility into the policy, thus allowing you to modify the face amount or the premium in response to your changing needs and circumstances.
As you pay your premiums, they are credited to the policy. Administrative fees are deducted and then the balance is credited to the policy value as net premiums. Additionally, certain amounts are deducted from the policy value each month, to cover the death benefits costs, as well as for any riders and/or supplemental benefits. Also, Interest is credited to the policy each month, based upon the policy's cash value.

Most policies have a decreasing surrender charge which is deducted from the cash value if the policy is surrendered. This feature allows the insurance company to recover certain expenses which are associated with the issue of the policy. The surrender value is the cash value less any applicable surrender charge.

Survivorship or "second to die"This type of coverage is generally offered either as a Universal Life or Whole Life insurance policy. Usually a husband and wife will purchase this type of policy which pays a death benefit at the later death of the insured couple. As you garner wealth, this policy provides a method of discounting your inevitable future estate tax liabilities which can amount to over half of your family's entire net worth! As a you can arrange your affairs so as to delay the payment of your estate taxes until the second insured's death. These "2nd-to-die" policies allow the insurance company to delay the death benefit payment until the second insured's death. This approach will then provide the necessary dollars to pay the taxes exactly when they are needed!

This type of coverage is is generally much less expensive than individual coverage on either spouse.


V. Michael Santoro is a published author and Internet Marketer. He writes on helpful topics of interest to families. For more information about life insurance and how to avoid any hidden surprise costs, please visit http://www.termlifeinsurancequoteonline.xscoop.info/