The 3 Main Types of Life Insurance

The 3 Main Types of Life Insurance

Many people think of life insurance to help their loved ones financially in the event of their death. While that is one important use for life insurance, it is not the only one. In fact, there are three main types of insurance, each with its own set of features and benefits.

Term Life Insurance

Term life insurance is a type of insurance that provides coverage for a set period of time, usually 10-30 years. If you die during the term of the policy, your beneficiaries will receive a death benefit. If you don’t die during the term, the policy expires, and you don’t get anything back. 

How Does Term Life Insurance Work?

You pay premiums (monthly or yearly) for the coverage, and if you keep paying, the policy stays in force. If you stop paying premiums, the policy lapses and there is no death benefit paid out if you die. 

What are the Benefits of Term Life Insurance?

-It’s affordable – Term life insurance is much cheaper than whole life. This makes it a good option for people who want to get insurance but don’t have a lot of money to spend on premiums. 

-It’s easy to understand – The death benefit pays out if you die during the term, and that’s it. There are no investment elements or cash value accumulation with term insurance like there is with whole life. 

-It can be used to cover specific needs – Since term insurance is less expensive than whole life, you can buy more coverage for less money. This can be especially beneficial if you have young children at home or a mortgage that needs to be paid off. 

Whole Life Insurance

With whole life insurance, you pay into the policy each month until you die or reach age 121 (whichever comes first). Your premium payments go into a cash value account that earns interest over time. The cash value account is what separates whole life from term insurance, which does not have a savings component. 

The death benefit is paid out to your beneficiaries tax-free when you die. If you die while the policy is active, your beneficiaries will receive the death benefit plus any accrued interest in the cash value account. If you live to age 121, you can choose to receive the death benefit as a lump sum or in monthly installments. 

When it comes to accessing the cash value account, there are two main options: taking out a loan or making a withdrawal. With a loan, you borrow against the cash value and don’t have to repay the loan if the policy remains active. With a withdrawal, you take money out of the cash value account but doing so will reduce both the death benefit and the cash value balance. 

Pros and Cons of Whole Life Insurance

Whole life insurance has its pros and cons, just like any other type of policy. Some people prefer whole life because it offers lifelong protection and has a guaranteed death benefit. Others find their whole life too expensive and prefer term life because it’s more affordable and offers just as much protection for a set period. 

Some additional pros of whole life include: 

• The ability to build cash value that can be used in retirement or for other purposes 

• A level premium that doesn’t increase with age 

• Policyholders can access discounts if they stay healthy 

And some cons include: 

• Higher premiums than term insurance policies 

• Cash value may not grow as quickly as hoped 

At the end of the day, whether whole life is right for you depends on your specific financial situation and goals. Be sure to work with an experienced agent who can help you compare types of policies and find the best fit for you and your family.  

Universal Life Insurance

Universal life insurance is a type of permanent insurance that offers death benefit protection and cash value accumulation in one policy. Universal life policies are flexible, which means that you can adjust your premium payments and death benefit amount as your needs change over time. 

One of the main advantages of universal life is that the cash value component grows tax-deferred, which means you won’t have to pay taxes on any gains until you withdraw the money. Additionally, universal life policies offer more flexibility than whole life policies when it comes to withdrawing money from the cash value account. 

How Does Universal Life Insurance Work?

Universal life insurance policies have two main components: the death benefit and the cash value account. The death benefit is the amount of money that your beneficiaries will receive if you die while the policy is in force. The cash value account grows over time as you make premium payments and can be accessed through policy loans or withdrawals. 

The cash value account earns interest at a rate set by the insurer, and the death benefit is typically equal to the face amount of the policy plus any accrued interest. When you die, your beneficiaries will receive the death benefit tax-free. 

Is Universal Life Insurance Right for Me?

Universal life insurance is an excellent choice for people who want permanent coverage with the ability to adjust their premiums and death benefit as their needs change over time. If you’re looking for an investment vehicle with potential tax advantages, universal life insurance may also be a good option for you. 

Finally

When deciding which type of life insurance is right for you, it is important to consider your needs and budget. Term life insurance is a good option if you need coverage for a specific period or if you are on a tight budget. Whole life and universal life insurance are good options if you need lifelong coverage or if you want to build cash value that you can access later down the road.

If you want to discuss options for life insurance, please call us at 561-732-9305. Our quoting hours are Monday through Friday from 8:30 AM to 5:00 PM. In addition, you can request a quote online. Please remember, We Handle All the Work, While You Save!

Robert Macoviak( President )

Robert Macoviak is the President of Oyer, Macoviak and Associates. Oyer, Macoviak and Associates is the oldest independent insurance agency in Boynton Beach and has been in business since 1953. Oyer, Macoviak and Associates are vested members of the community who are committed to doing business face-to-face and being your insurance advocate in times of need.