subject: The Different Types Of Life Insurance [print this page] There are basically five different types of life insurance, and knowing the different types can help you decide which one is right for you and your family. The cheapest and simplest insurance is the term life insurance. This is just insurance on the event of your death, and pays a designated amount of money to the beneficiary. It has no cash value like other policies, and both the policy limit, as well as the death benefit is the same, up to $200,000. If you want a policy that protects your family when you die, can pay for funeral expenses, as well as a some extra to help them out, this is the way to go.
Other types of life insurance include not only a death benefit, but also have a cash value. These policies tend to be higher because not only are you paying for insurance, but are also putting funds into a savings account, which you can borrow against, or use as collateral. One of these is called whole life. Whole life gives your family permanent protection, as well as builds cash value, which the insurance company manages. There are both advantages and disadvantages to this kind of policy. It provides a death benefit, and offers a tax deferred accumulation of money, in a low risk account. You pay a fixed premium as long as you pay the policy. You can receive dividends from the accumulated money, or use it to reduce your payments in case of an emergency. The downside is that you have no control over how the money is invested, and doesn't offer face amount, or premium flexibility.
Variable life insurance also provides permanent protection, with more flexibility, and can be better for the higher risk oriented policy holder. It does provide the same benefits, and this is a tax free, and allows more flexibility of the death benefits, depending on how much you borrow against it during your life. It still doesn't offer premium or face amount flexibility, and there is no guarantee to the amount of cash value during you life.
Universal life insurance is much more flexible than these other two for many reasons. It offers you the same benefits, as well as allowing your to earn interest at market rates, and you can withdraw funds, or borrow against the policy at anytime. It offers flexibility when it comes to the face amount, as well as the premiums, but you still can invest your accounts the way you want too, or split your money among different accounts.
The most flexible life insurance is the Universal Variable. This gives you much more control over how your insurance and cash value accounts are managed. If offers you several different options for investing, such as bonds, the stock market, or money market accounts. It offers complete flexibility, and lets you borrow or withdraw as soon as funds are available. However, there are some draw backs. You have to spend the time to manage these accounts, rather that letting the insurance company do it for you. So the success depends entirely on you. Another thing is that if you have smaller premiums, then it doesn't work too well because you're paying for the death benefits as well as the accounts.
by: John Kurtz
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