How Many Types of Life Insurance Are Available?

iQuanti: Life insurance pays out funds to your loved ones when you die, offering them financial security and peace of mind. Some plans also let you build wealth through a cash value component that can accumulate over time. There are many types of policies that may be available to you, and each may fit different financial goals and life circumstances. Let's dive deeper into several of the major types of life insurance so you can compare life insurance quotes and decide which policy is right for your needs.

1. Term life insurance

Term life insurance is a type of policy that covers you for a specific time period, usually 10 to 30 years. If you die while the policy is in force, your loved one will receive the death benefit. Once your policy term ends, you'll have to get a new policy to continue coverage. Term life insurance premiums tend to be more affordable than permanent life policy premiums.

2. Whole life insurance

Whole life insurance is a type of permanent life insurance policy, meaning it offers guaranteed lifetime coverage as long as you continue to pay premiums. Part of each premium you pay goes into a growth component called the cash value, which grows tax-deferred at a fixed rate. As the cash value grows, you can use it for the following:

• Withdraw from it: You can withdraw some of your cash value. This may reduce the death benefit, and you could potentially be taxed on gains.
• Borrow from it: You can get a low-interest, no-credit-check loan from your cash value. There's no set due date, but your policy may lapse if the loan grows larger than the cash value.
• Surrender the policy: You can receive your full cash value minus surrender charges if you surrender their policy. Keep in mind that any gains could be subject to taxes.

3. Final expense insurance

Final expense insurance is a small whole life policy designed to cover end-of-life costs, such as funeral expenses or outstanding medical bills.  These policies have smaller death benefits and lower premiums than standard whole life policies. Final expense insurance also doesn't require a medical exam, making it a simpler life insurance option for people in good health.

4. Universal life insurance

Universal life insurance is a type of permanent life insurance policy. It offers adjustable premiums and death benefits, and the cash value grows based on current interest rates. Once you've built up enough cash value, you can use it to pay part or all of your premiums.

How to pick the best life insurance plan

There are several types of life insurance policies, and each one can fit different customer needs. Term life insurance may work best for those who don't need guaranteed lifelong coverage and want to save on premiums. And permanent policies like whole life, final expense, and universal life insurance may suit you better if you need guaranteed lifelong coverage or have complex financial goals.

To choose the right life insurance policy for your needs, it's important to weigh your current situation and your financial goals. Then, be sure to shop around so that you can find the coverage you need at a rate that fits your budget.