Life Insurance

What are the principal types of Life Insurance?

There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life, and variable universal life.

Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

Wondering how much life insurance you might need? Check out the Life Insurance Needs Calculator and Guide to Life Insurance for Parents of Children with Disabilities

Life Insurance with Pre-Existing Condition

Caring for a child with special needs can be both a great joy and a challenge. You want your child to live to their full potential, in whatever form that takes, for their entire life. That may take additional resources, especially if you should die while they are still in need of care.

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Term Insurance
There are several different types of term insurance you can consider:

• Renewable Term Insurance
• Convertible Term Insurance
• Level Term Insurance
• Decreasing Term Insurance
• Increasing Term Insurance

Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies—level term and decreasing term.

• Level term means that the death benefit stays the same throughout the duration of the policy.
• Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.

Whole Life/Permanent Insurance
There are four basic types of permanent insurance:

• Whole Life
  • Joint Whole Life
  • Survivorship Life
• Universal Life
• Variable Life
• Variable Universal

Whole Life or Permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these “overpayments” reach a certain amount, they must be available to the policy owner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

What to do when term life insurance is about to expire and you still need coverage

here

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