Buying life insurance can be confusing; but it doesn’t have to be. If you know the differences in the types of life insurance policies on the market, your search will be a lot easier.
There are 2 types of life insurance; term and permanent. When you gather your life insurance quotes, be sure to request quotes on each type.
Your list will include term life insurance, whole life insurance, universal life insurance and variable life insurance. Each one of those life insurance policies will have different features and benefits that meet different insurance needs. Let’s look at the differences.
The Differences In Life Insurance Policies
Term Life Insurance Benefits & Features:
- Term life insurance only offers a death benefit.
- Term life insurance policies will not accumulate any cash value.
- A term life insurance policy is similar to renting.
- When you rent a place, you are not building up any equity in the property.
- When you buy a term life policy, you are not building up any equity in the policy.
- Your equity in a life policy is your cash value.
- There is no cash value in a term life policy.
Permanent Life Insurance Benefits & Features:
- If you need a death benefit and cash value, a permanent life insurance policy is the right type of life insurance policy; you then need to determine which policy best satisfies your financial needs.
- Permanent life insurance policies include: whole life, universal life and variable life.
- Permanent life policies provide a guaranteed death benefit.
- Permanent life policies also offer cash values.
- Whole life policies build up guaranteed cash value; that’s your equity.
- As long as you pay your premiums, a whole life policy offers a guaranteed cash value.
- Universal and variable life policies also offer cash value.
- The cash value in a universal and variable life insurance policies is not a firm guarantee though.
- The cash value accumulation with the universal and variable life insurance policies will vary.
- The variance is based on the performance of the underlying investments that the life insurance company has invested in.
- Variable life insurance policies invest in sub-accounts, which are similar to mutual funds.
- So with a variable life policy, your cash value will vary with the market swings.
- When getting a variable life insurance quote, ask the life insurance broker for the minimum guaranteed and the variable cash value.
- Also ask your agent for prospectus.
- The prospectus will list the sub-accounts that your policy will be invested in.
There are enough life insurance products available on the market today to offer the variety in benefits that consumers are looking for.
Be a smart consumer, when shopping for a life insurance quote, ask the life insurance agent for a quote on all of the different types of life insurance policies…term, whole, universal and variable life insurance.