Life insurance policies are designed to cover your family members in case they suddenly face a great financial burden after you unexpectedly pass away. This insurance can help with a range of expenses from helping with mortgages to funeral expenses. Not all life insurance policies are created equal, however. It is important to find the right policy for you and your family based on your insurance needs.
There are three main types of life insurance policies. While similar, they offer different aspects geared toward specific needs. The three main types are:
Whole Life Insurance
Just as the name suggests, a whole life insurance policy covers the policyholder for the entirety of their life. As long as they live, this policy will be active. Once the policyholder passes away, beneficiaries on the policy can file a claim to receive certain benefits as outlined by the policy. This type of life insurance is useful for those who simply want to purchase a one-time policy and especially for those who serve as the breadwinner in their family. This means that no matter at what point they pass away, their family may face a heavy financial burden after their passing.
Term Life Insurance
Term life insurance policies are another commonly used type of life insurance. Whereas a whole life insurance policy covers the policyholder indefinitely, term life insurance policies will only cover the policyholder for a set term. Usually, these terms range from 10, 20, or 30 years, but other terms are available, as well. This type of policy is useful for those who only want enough coverage until they’ve paid off a certain debt or reached a certain milestone in their life. For example, if you only want life insurance until your student loan debt is paid off so that your family is not faced with it after your sudden passing, you can purchase a term life insurance policy for the amount of time you believe it will take to pay off your student loan debt.
Universal Life Insurance
Universal life insurance is a type of whole life insurance policy. While this does last as long as the policyholder lives just like a whole life insurance policy, there are distinct differences. Universal life insurance policies offer a cash value policy system that allows you to withdraw cash value from your policy while it is still active.