Life insurance is a contract between an individual and an insurance company in which the individual pays regular premiums in exchange for a payout to their beneficiaries upon their death. The goal of life insurance is to provide financial protection to loved ones after the policyholder passes away. Here’s a breakdown of the main types of life insurance:
- Term Life Insurance:
- Provides coverage for a specific period, such as 10, 20, or 30 years.
- If the policyholder dies within the term, the beneficiaries receive a death benefit.
- No cash value or savings component; it’s purely a death benefit.
- Whole Life Insurance:
- Offers coverage for the policyholder’s entire life, as long as premiums are paid.
- Includes a savings or investment component known as “cash value,” which grows over time.
- Premiums tend to be higher than term life insurance, but it provides lifelong protection.
- Universal Life Insurance:
- A more flexible form of permanent insurance, combining life coverage with a savings component.
- Allows the policyholder to adjust premiums and death benefits.
- Cash value grows based on interest rates or investment choices.
- Variable Life Insurance:
- Similar to whole life insurance but with more investment options for the cash value.
- The cash value can be invested in stocks, bonds, or mutual funds, allowing for potential growth, but also greater risk.
- Final Expense Insurance:
- A smaller, more affordable policy meant to cover end-of-life expenses like funeral costs and outstanding medical bills.
Would you like more detailed information on any specific type of life insurance, or how to choose the best one for your needs?