It’s understandable that many consumers looking into Life Insurance feel overwhelmed by the number of options out there. It can be difficult to understand the differences between different policies, but it’s essential that every person taking out a policy have a basic grasp of what kinds of Coverage he or she will have. Read on to get an introduction to what’s available.
Whole life policies cover policyholders for their entire lives, not just a portion of them. These policies are sometimes referred to as permanent policies, and they are generally offered at a fixed rate. The policies accumulate cash value as policyholders age, so it’s often possible to borrow against the cash value of permanent policies.
Universal policies are similar to permanent policies, but they feature a lower net cost over time and death benefits that are not fixed. Like permanent policies, they do build cash value, but the death benefits they pay out will depend on several factors. These include the ability of policyholders to continue making premium payments, changes to their insurer’s policy charges, and credit ratings.
Set Period Options
Term policies cover policyholders for a predetermined number of years rather than their entire lives. If policyholders die within the period of time specified by their insurance, the beneficiaries will receive benefits that are fixed from the start of the policy. If they outlive their policies, they may be offered a renewal option or the ability to switch the policies to a form of permanent insurance.
Accidental death policies include exclusions for suicide and negligence. They are often used as fringe benefits to offer an extra payout in the event that a policyholder dies in an accident rather than of natural causes. It’s usually best to purchase accidental death policies in conjunction with other forms of insurance.
Choosing the Right Option
It can be difficult to determine which option is best for a particular policyholder and his or her family. Things like the policyholder’s budget, his or her projected ability to continue making payments, and the ability to qualify for certain types of insurance all come into play, so it’s a good idea to consult an insurance agent prior to taking out a new policy.