Life insurance can allow you to create peace of mind for your family or even prepare for your retirement. But you need to first be aware of the different types of plans to ensure you’re adequately covered.
Whole life insurance: Whole life insurance covers you for the entire duration of your life. It protects your loved ones from financial difficulties in case you pass away. It also accrues value towards your retirement savings and can act as a safety net in case of hard times. The premiums here are more expensive than those for term life insurance. But this type of coverage is the strongest form of guaranteed protection even though the return on investment is lower.
Universal life insurance: This is a new type of insurance that was designed to cancel what people didn’t like about whole life insurance, namely inflexible premiums and low investment returns. Universal life insurance can be bought with one large premium at the start of the policy, or variable premium payments can also be made over time. Premiums and investment returns are affected by interest rates. While this policy offers increased flexibility, it also poses a higher risk. It is also rather complicated, and you should understand all terms and conditions before you buy it.
Term life insurance: This is the most basic and popular type of life insurance. Its only job is to protect your loved ones from financial difficulties in the event of your death. This type of coverage has a set term after which the policy expires. The point of this plan is to cover you during your earning years and expire around retirement age when financial protection isn’t needed anymore. Some policies are also sold with an automatic renewal clause. But term extension may not be allowed if you fall seriously ill. Premiums for term plans can be fixed or adjustable.
Accidental death and dismemberment: This type of insurance offers extra coverage in case you’re involved in a fatal accident or receive serious injuries like paralysis or limb loss. This additional coverage helps if you have low-cost life insurance. This insurance helps because the nature of loss caused by accidental death or dismemberment can cause extra difficulties for all involved.