Term Life Insurance
One of the most straightforward and affordable options is term life insurance. As the name suggests, term life policies provide coverage for a specific period, such as 10, 20, or 30 years. If the policyholder passes away within this term, the death benefit is paid out to the beneficiaries. However, if you outlive the term, the policy simply expires, and no benefit is paid.
Whole Life Insurance
On the other end of the spectrum, whole life insurance offers lifelong coverage. Unlike term life, whole life policies come with a savings component, known as “cash value,” that accumulates over time. These policies generally have higher premiums but offer the security of a guaranteed death benefit and the potential for investment growth.
Universal Life Insurance
Universal life insurance is another type of permanent coverage that offers more flexibility than whole life. Here, you can adjust the premiums and death benefits according to your needs. Like whole life, universal life policies also have a cash value component that can earn interest or be invested for potential growth.
Variable Life Insurance
If you’re interested in investment opportunities, variable life insurance might be a suitable option. This policy allows you to allocate a portion of your premiums to a separate account made up of various investment options. While this could increase the cash value and death benefit, it also adds a layer of risk as the policy’s value can fluctuate with market performance.
In summary, the type of life insurance policy you choose should align with your life stage, financial goals, and risk tolerance. The next chapters will help you dive deeper into assessing your financial landscape and dependents, weighing the costs and benefits, and other key considerations that should influence your decision.
