Types of life insurance

Who needs life insurance? In a way we all do, we want to ensure that, if the worst happens, there will…
Types of life insurance
Foto: sxh.hu

Who needs life insurance? In a way we all do, we want to ensure that, if the worst happens, there will be a fund available for our family to depend on, unfortunately some statistics show that Hispanic families are the least inclined to buy this kind of insurance.

It is important to purchase insurance, as most policies pay what is known as a death benefit to survivors when the insured passes away. Funds from the death benefit can be used to pay for funeral costs, memorials, or to help take care of the insured’s family if they were the sold breadwinner.

Life policies can be purchased in the following ways:

Term insurance is considered a basic insurance. People purchase this type of insurance in what is known as terms, or a certain period of time. The term can be 10 to 30 years in length. No cash value is built during the term which means that a death benefit is only paid to the beneficiary if the insured dies during the life of the policy or term. At the end of the term, the insurance is terminated with no benefits paid if the insured has not passed away.

Whole life is different from term policies, as it builds cash value and pays a benefit to the beneficiary when the insured passes away with no stipulation on length of contract. The insurance is good for life, as long as the premiums are paid. This type of insurance builds a cash value that can be borrowed against. In the event that the insured does pass away, the beneficiary collects on the death benefit, not the cash value.

Universal insurance is very similar to whole life policies. One of the exceptions is that it can be purchased in terms. The beneficiary will receive the death benefit if the insured passes away along with the cash value specified by the contract.

This policy is a bit different from the typical universal life insurance policy as it allows the premiums to be invested in stocks or bonds. The accumulated cash value can change over time, though if the insured passes away the beneficiary will still receive the accumulated cash value along with the death benefit. Premiums on this type of policy may change due to market value of stocks.

As for cost, term life insurance usually has the lowest premiums. Other policies will have a variable cost which depends on the issuer of the policy and also on market value when dealing with variable policies. Life insurance can often be purchased from employers through their health insurers.

Don’t have questions about life insurance, always know upfront what you need and what you are buying.