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Life insurance can be a tricky form of insurance to purchase. There are two quite different types of life insurance and multiple ways a life insurance policy can be purchased. This complexity basically demands the buyer to do some background research, and carefully compare life insurance quotes. Life insurance is not one-size-fits-all and when comparing life insurance you want to make certain you are comparing apples-to-apples to get the best low cost life insurance.
Life insurance is also different from other forms of insurance in that you are insuring a life and not an object. Life insurance can be a major aspect of your financial planning and strategy, and some policies offer more than simple death benefit protection.
Term Life insurance versus Permanent Life Insurance
Term life insurance and permanent life insurance is the starting point when looking for life insurance. Keep in mind these two basic life insurance categories are very different and life insurance policies can combine benefits or even change from one type of life insurance to another type of life insurance at some point. Term life insurance in its simplest form is life insurance coverage a set period of time – the “term.” Your beneficiaries are paid a death benefit only if you die during the term. Keep in mind term life insurance does not usually build up a cash value, but at the same it typically offers lower premiums in the early years of the life insurance policy.
Premiums do rise with term life insurance as you renew terms. Often you can renew your term life insurance policy, even with a health change, but expect to pay a higher premium. Questions to ask when comparing term life insurance include if there’s an age limit to renewing the policy, and if renewal of your term life insurance policy starts requiring a physical examination at some point.
The second major type of life insurance policy is permanent life insurance. Permanent life insurance comes in a number of types including universal life insurance, variable universal life insurance, and whole life insurance. The key difference between permanent life insurance and term life insurance is permanent life insurance policies offer long-term financial protection. Premiums are usually higher, but permanent life insurance includes a death benefit and very likely a cash savings.
Individual Life Insurance, Group Life Insurance and Credit Life Insurance Policies
The next set of choices to tackle is how to actually buy your life insurance policy – as an individual or as part of a group. Individual life insurance gives you the most control over your policy. You make every decision for the life insurance policy, such as choosing the life insurance company, the actual life insurance plan and the life insurance policy features to customize the life insurance plan for you and your family’s needs.
There are a number of ways of buying an individual life insurance policy, but it is commonly done through insurance agents or insurance brokers. Any individual life insurance policy will include fees or commissions, with the usual commission in the form of a “load” figured into the life insurance premium rate.
With a group life insurance policy you most likely be automatically insured by your employer, often with an option to add to that insurance under the group policy. Most group life insurance provided by an employer is term life insurance, and it does have some advantages. The rate is often lower than for individual life insurance, you likely receive the life insurance without any health qualifications, and the payment usually comes in the form of a payroll deduction which helps ensure you don’t miss a life insurance premium payment.
With all these options in types of life insurance policies and how to buy the life insurance products, it’s easy to see how important comparing life insurance possibilities and doing your background research is before actually buying life insurance.
One final type of life insurance above and beyond the life insurance options listed above is credit life insurance. This life insurance comes from lending institutions and credit card issuers, and will pay off your outstanding loans as a death benefit. Sometimes credit life insurance is built into the loan and other times life insurance can be offered as an option as part of your credit agreement.