The insurance industry can be confusing for the lay person, which is why choosing the right type of life insurance policy for you might fee like an overwhelming decision. Your agent might present you with three or four different options all with their own pros and cons. How are you supposed to make an educated decision? An easy way to make this choice a little less stressful is to know about each type of common life insurance policy and how it works.
There are lots of affordable term life insurance policies to fit every budget. Term life refers to the amount of time your policy will be in effect—typically 10, 15, or 20 years. With this type of policy, you’ll pay a monthly premium to keep the contract in force for the duration of the policy term. At the end of the term, if you haven’t filed a claim and weren’t eligible to receive benefits, then the contract terminates and you do not receive any of your benefit amount. These loans are a good choice for young couples or people with outstanding debt such as student loans or a mortgage.
This type of policy lasts for your entire life, no matter when you purchase it. There are lots of pros besides duration with this policy, including the fact that it builds cash value as you put into it. Usually, after a certain number of years or once you reach retirement age, you can actually withdraw the cash value of your whole life policy if you need extra money. These policies stay in effect as long as you pay your monthly premiums and often offer larger benefit amounts than term life. The only downside is because of the length of these contracts, they are often more expensive, especially if you opt in later in life.
Group life insurance is typically offered through your employer and insures other members of the company as well. At most businesses, the company will cover the premiums for the members and the families are listed as the beneficiaries. These plans are great if you don’t have to pay into them, but they also stay with the job not the person. So if you have a group life insurance policy but leave your job, the policy won’t follow you.
These are some common life insurance options you might want to consider when shopping for a policy that fits your lifestyle.