Buying life insurance isn't an easy decision, or one that should be made in a hurry. Three major different types of insurance are available to individuals, all which may meet different needs and budgets. Understanding the different kinds of insurance available will help you make wise and informed decisions about choosing the right kind, in the right amount and at a budget that you can afford.
Whole Life
A whole life insurance policy stays in effect as long as premiums are made on time. These premiums are stable over the life of the policy. Whole life policies are designed to last a person's entire life, and the insurance company may also invest premiums, which share proceeds through benefits, most commonly known as cash accrual. Policy holders are offered choices in how their premiums are invested. These funds can be borrowed against by the policy holder during the lifetime of the policy, with the amounts deducted at the time the policy is paid out unless the individual replaces those funds before that date.
Term Life
Term life insurance is considered a type of temporary insurance designed to last for only a designated period of time, the most common being 10, 20 or 30 years. Premiums for term life are cheaper because, in most cases, cash value on the policy is not accrued. Premiums on term life policies may rise as the person gets older, and such terms should be discussed with agents prior to making a selection.
Universal Life
A universal life insurance policy is somewhat like a whole life policy, except that the person obtaining the policy may determine how much of a death benefit he wants and what he would like his monthly premiums to be set at (within reason). The person owning the policy can make changes in these amounts on a yearly basis. A universal life policy may also accrue a cash value based on current interest rates. This means that if interest rates are high, the policy can expect a high rate on returns. Cash value may be used to pay premiums or left in the account to continue accruing.
This type of insurance policy may also be termed a variable life insurance policy, similar to a universal policy, but one that enables the policy holder to have a say in how his premiums are invested.
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