There are two types of coverage provided by life insurance:
- Cause of death: The life insurance policy will pay, if your demise is caused by natural causes, accidents, or suicide.
- Expenses: The beneficiaries usually use the financial support for everyday expenses, outstanding debts, childcare, end-of-life expenses, or college costs.
The various types of life insurance are:
- Term Life Insurance: This insurance provides coverage for a specific term or length of time, typically between 10, 15, 20 or 30 years. It is sometimes called “pure life insurance” because there is no cash value to the policy. It's designed solely to give your beneficiaries a payout, if you pass away during the term or policy period. The policy also has level premiums, so you pay the same amount every month. When the term expires, there is no more coverage.
- Whole Life Insurance: Also known as permanent life insurance, this policy provides coverage for your whole life, paying you benefits, regardless of when you pass away. Whole life insurance also serves as a savings component where a portion of your premium is placed into a cash value account, and the money grows over time on a tax-deferred basis. A whole life policy has three defining characteristics: (a) The level premium remains the same for life; (b) The death benefit is guaranteed if the guaranteed premiums are paid; and (c) The policy offers guaranteed cash values that grow at a guaranteed rate. Cash value provides several benefits. For example, you can borrow money against the cash value, use it to help pay your premiums, or even surrender it for cash for retirement.
- Universal Life Insurance: A universal life insurance offers cash value and lifetime coverage benefit of whole life and the premiums are flexible. You can also raise or lower the amount of premium you pay into the policy. This type of policy can adjust to your life circumstances while providing the same kind of cash value growth as whole life. Having another child, moving on to a different job, or taking out a loan to buy a business are some of the instances where a combination of security and flexibility becomes important. Universal life is structured to have two distinct components of your premium payment. One part of your premium payment goes to the insurer, contributing to your death benefit and administrative costs. Another part goes into a savings account that earns some type of interest. As the money grows, you can either pay your premium directly or borrow money from the savings account.
- Final Expense Insurance: Final expense insurance is a form of life insurance meant to cover end-of-life expenses, such as funeral and burial costs. The coverage is permanent, given that you pay the premium payment. One item to take note of is that there is no cash value or investment component to these policies. People often buy final expense coverage without dependent children because it helps protect loved ones who might otherwise have to cover these costs out-of-pocket.
- Group Life Insurance: This type of life insurance is bought as part of a group, typically, through work as part of your employee benefits package. Most group life insurance is term, but some companies also offer permanent coverage as an employee-paid benefit.
Please setup an appointment or call us at 209-400-9785 to review your policy or insurance need with us. You can also get a free quote by filling up the following form: