So, you’ve decided to purchase a life insurance plan! That’s great news. But, it’s equally important that you pick the right type of life insurance plan. Unsure of what the various types of life insurance plans are? This article is for you!
Here’s all you need to know about the common types of life insurance plans.
Term Life Insurance
This is the most straightforward type of life insurance plan. Your premium payments guarantee a specific payout to your beneficiaries in the event of your death, provided that the policy is still active. Essentially, it protects your family during the years when a tragedy could be the most financially disruptive.
Pros of term life insurance: It’s the most affordable life insurance plan.
Cons of term life insurance: If you outlive your policy, neither you nor your beneficiaries will receive any payout.
Whole Life Insurance
This type of life insurance plan lasts until you pass away, as long as you continue making the due premium payments. It’s really the closest thing to “buy it and forget it” life insurance. Essentially, with this type of policy, your premiums remain the same for the duration of the policy term and you get a guaranteed rate of return on the cash value of the policy. The death benefit payout also doesn’t change.
Pros of whole life insurance: It lasts for your entire life and builds a cash value
Cons of whole life insurance: It may be more expensive than term life insurance
Guaranteed Universal Life Insurance
Here, the death benefit is guaranteed (you can choose the age to which you would like this benefit guaranteed). Your premiums will also not change. There usually is little to no cash value, and insurance companies will require you to pay premiums on time.
Pros of guaranteed universal life insurance: Given the minimal cash value, it is cheaper than whole life insurance.
Cons of guaranteed universal life insurance: If you miss a premium payment, you could forfeit the plan. And, since the policy may not build a cash value, you will end up walking away with nothing.
