While there are many types of life insurance available, there is no best type for everybody. If there was, there would only be one type of life insurance. There is a best plan for each individual, however, and each individual must determine his needs and goals, and choose the plan that best fits those needs.
Types
There are many types of life insurance, but they can basically be broken into two groups: term life and permanent life. As the name implies, term life is for a specific time period, while permanent life is considered to last a lifetime.
Benefits
Term life insurance provides a death benefit if the policyholder dies while the policy is in place. Permanent life insurance plans come with an additional investment aspect, as a portion of premium payments are put into a separate account that is invested by the insurance company. The investment account will grow and accumulate what is known as cash value. That is money that can be withdrawn or borrowed against by the policyholder.
Significance
Because term life does not build any cash value, it is typically cheaper than any form of permanent life insurance. This is important for those on a budget. Additionally, term life insurance can be purchased to coincide with a major purchase, such as a house, so the benefit amount is the highest when it can be needed most. But as a trade-off, when a term life policy expires, the policyholder does not receive anything and will need to purchase a new policy if continued coverage is desired.
Features
Permanent life insurance will last for the policyholder's lifetime, provided the premiums are paid. That can be a great asset if one's health begins to decline or as one gets older. The savings element is an additional benefit for many, who may have trouble saving on their own, but the return is typically less than they would accomplish investing on their own.
Considerations
Purchasing life insurance is a big decision that can have a profound effect on the financial well-being of one's family. It is important to seek advice from a qualified insurance agent, who has knowledge of all the different plans and their specifics. It is always a good idea to have a good fundamental background about the different types of policies before speaking with an agent, who may be more interested in selling you a policy that earns the highest commission, as opposed to the policy that is right for you.
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