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Types Of Life Insurance Policies – Which Is Right For You?

Term Life by definition is a life insurance policy which provides a stated benefit upon the holder’s death, provided that the death occurs within a certain specified time period. However, the policy does not provide any returns beyond the stated benefit, unlike an insurance policy which allows investors to share in returns from the insurance company’s investment portfolio.

Annually renewable term life.

Historically, a term life rate increased each year as the risk of death became greater. While unpopular, this type of life policy is still available and is commonly referred to as annually renewable term life (ART).

Guaranteed level term life.

Many companies now also offer level term life. This type of insurance policy has premiums that are designed to remain level for a period of 5, 10, 15, 20, 25 or even 30 years. Level term life policies have become extremely popular because they are very inexpensive and can provide relatively long term coverage. But, be careful! Most level term life insurance policies contain a guarantee of level premiums. However some policies don’t provide such guarantees. Without a guarantee, the insurance company can surprise you by raising your life insurance rate, even during the time in which you expected your premiums to remain level. Needless to say, it is important to make sure that you understand the terms of any life insurance policy you are considering.
Return of premium term life insurance

Return of premium term insurance (ROP) is a relatively new type of insurance policy that offers a guaranteed refund of the life insurance premiums at the end of the term period assuming the insured is still living. This type of term life insurance policy is a bit more expensive than regular term life insurance, but the premiums are designed to remain level. These returns of premium term life insurance policies are available in 15, 20, or 30-year term versions. Consumer interest in these plans has continued to grow each year, as they are often significantly less expensive than permanent types of life insurance, yet, like many permanent plans, they still may offer cash surrender values if the insured doesn’t die.

Types of Permanent Life Insurance Policies Hauser Insurance

A permanent life insurance policy by definition is a policy that provides life insurance coverage throughout the insured’s lifetime ñ the policy never ends as long as the premiums are paid. In addition, a permanent life insurance policy provides a savings element that builds cash value.
Universal Life

Life insurance which combines the low-cost protection of term life with a savings component that is invested in a tax-deferred account, the cash value of which may be available for a loan to the policyholder. Universal life was created to provide more flexibility than whole life by allowing the holder to shift money between the insurance and savings components of the policy. Additionally, the inner workings of the investment process are openly displayed to the holder, whereas details of whole life investments tend to be quite scarce. Premiums, which are variable, are broken down by the insurance company into insurance and savings. Therefore, the holder can adjust the proportions of the policy based on external conditions. If the savings are earning a poor return, they can be used to pay the premiums instead of injecting more money. If the holder remains insurable, more of the premium can be applied to insurance, increasing the death benefit. Unlike with whole life, the cash value investments grow at a variable rate that is adjusted monthly. There is usually a minimum rate of return. These changes to the interest scheme allow the holder to take advantage of rising interest rates. The danger is that falling interest rates may cause premiums to increase and even cause the policy to lapse if interest can no longer pay a portion of the insurance costs.

To age 100 level guaranteed life insurance

This type of life policy offers a guaranteed level premium to age 100, along with a guaranteed level death benefit to age 100. Most often, this is accomplished within a Universal Life policy, with the addition of a feature commonly known as a “no-lapse rider”. Some, but not all, of these plans also include an “extension of maturity” feature, which provides that if the insured lives to age 100, having paid the “no-lapse” premiums each year, the full face amount of coverage will continue on a guaranteed basis at no charge thereafter.

 

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