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Types of Life Insurance – Which One Should You Buy?

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life insurance company in richmond vaIt’s well known that life insurance is bought so that the death of the policyholder can benefit her/his beneficiaries in terms of a lump sum amount. However, life insurance can be chosen according to the specific needs of the buyer. Experts at FNB Hope share tips here on how to choose among the various types of life insurance according to one’s needs.

Types of Life Insurance

There are three different types of life insurance, viz. Term, Universal and Permanent.

Term Life Insurance

This is meant to provide monetary protection for only a particular period, say 10 or 15 years. With a typical term life insurance policy, the amount of premium stays the same for the period you choose. After that term, policy may provide continuous coverage, often at a significantly higher rate of premium. Term life insurance is usually less costly than permanent life insurance.

Term life insurance can be bought to substitute potential income if it is lost during working years. So, your beneficiaries get a protection and it’s ensured that the financial goals of the family, such as running a business, paying off a mortgage or paying for education, will be met.

It should be noted that though term life insurance can be helpful in replacing lost potential income, benefits of life insurance are paid at one time in the form of a lump sum and not in the form of regular payments.

Universal Life Insurance

This type of insurance policy offers lifetime coverage. These policies are also flexible, unlike whole life insurance, and may enable you to increase or lessen your premium amount or coverage amounts across your lifetime. Because of its lifetime coverage, this type of life insurance tends to have higher premium payments than that of term.

Universal life insurance can be bought as a flexible strategy of estate planning so as to help protect wealth to be passed on to beneficiaries. It is also a long term replacement of income, if there are chances that requirements will exceed beyond working years.

Whole Life Insurance

This type of life insurance offers permanent coverage for lifetime. As it provides lifetime coverage, its premium amount is higher than that of term life insurance. Also, unlike term, premium payments tend to be fixed and have a cash value, which serves as a saving and may mount up tax-deferred in due course.

Whole life insurance can be bought as an estate planning strategy to protect wealth so as to pass on to the beneficiaries.

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