Life insurance coverage is available for many budgets and coverage requirements. Policies can cover you for just a few years or for decades. They can provide $1,000 in coverage up to millions of dollars in coverage, depending on your needs.
Although terms and benefit amounts vary, the purpose of life insurance does not. Life insurance helps provide financial support for your loved ones after you die. Beneficiaries can use money from life insurance policies to cover financial obligations such as replacement income, mortgages, emergencies, college expenses, and funeral costs. The policy beneficiary can determine the best use of the funds.
Term life Insurance provides life insurance coverage for a specific period of time — or “term” — that can span anywhere from 1 year to 30 years or more. The policy pays a death benefit only if you die during that term.
After the term ends, your coverage will end or in other cases the premiums will go up substantially every year.
Term life insurance is typically less expensive than cash value — or “permanent” — life insurance options if you do not need life insurance for your entire life.
Return of premium term life insurance provides coverage for a specific period of time — or “term” — and pays a death benefit only if you die during that term. If you live beyond a specific number of years and cancel your policy, or reach the duration of the term, the insurance company will return all or some of the policy premiums that you have paid.
Life insurance policies that include return of premium tend to have higher premiums than policies without return of premium.
No medical exam term life insurance — also called “simplified issue” — is term life insurance that doesn’t require you to submit to a medical exam during the application process. It’s a quick and easy way to get term life insurance.
Simplified issue term life insurance is usually issued without a medical exam or lab work, but the insurance company may ask you several health-related questions when you apply. This type of insurance may be the best option for you if you want life insurance quickly or if you have had health problems, since your health may not affect your premiums as much as it would for a fully underwritten policy.
Final expense life insurance is a permanent — or “cash value” — form of life insurance coverage, which means it remains in force for your entire life as long as the premiums are paid. A final expense life insurance policy is designed to help beneficiaries pay for expenses such as funeral and burial costs, medical bills, and consumer debt, but it can be used for other expenses as well.
Final expense policies typically come with lower coverage levels than other life insurance products. Coverages typically ranges from $1,000 to $50,000.
Some final expense policies build cash value, which you may be able to use to take out a loan.
Accidental death life insurance is a limited form of life insurance that only pays benefits if your death is deemed a qualified accident. It is often available as an optional rider that can be added to another life insurance policy or it can be purchased as a standalone policy. However, stand-alone accidental life insurance policies do not provide the same level of protection as other life insurance policies.
Unintentional injuries are the fifth leading cause of death in the United States, according to the National Safety Council. Unintentional injuries can include accidental falls, homicide, and equipment malfunctions.
An accidental death life insurance policy only pays a death benefit if you die from a qualified accident during the policy term. Each insurance provider will have different standards for events and circumstances that qualify as accidental.
Accidental death life insurance is typically less expensive than other types of life insurance because it only provides coverage in the case of a qualified accidental death.
Whole life insurance is a permanent — or “cash value” — form of life insurance coverage that builds cash value over time and remains in force for your entire life as long as the premiums are paid.
A whole life insurance policy has guaranteed benefits, premiums, and cash values that are established when you buy the policy and do not change. The policy benefits are guaranteed for the life of the insurance policy and will be available after your death as long as there are no loans against the policy.
The policy’s tax-deferred cash value will increase each year as you make premium payments, and you can take a loan from the policy.
Whole life insurance tends to have higher initial premiums than term life insurance options, which remain in place only for a specified period of time and only pay a benefit if you die during that period.
Universal life insurance is a permanent — or “cash value” — form of life insurance coverage that offers more flexibility than other life insurance options. The premiums and death benefits are adjustable and can be changed throughout the life of your policy. Universal life insurance remains in force for your entire life as long as the premiums are paid.
A universal life insurance policy also gives you access to a cash reserve, which accumulates over the duration of your policy. You will have access to the cash value and can take a loan from the policy. The policy’s cash value is interest sensitive and will grow as interest rates increase.
Universal life insurance tends to have higher initial premiums than term life insurance options, which remain in place only for a specified period of time and only pay a benefit if you die during that period.