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What Are The 2 Major Type of Life Insurance?

What Are The 2 Major Type of Life Insurance?

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In life, there are a lot of possibilities and uncertainties that could happen. Unfortunately, some of these events bring bad news – accidents, bankruptcy, property damage, and a lot more. In all of these unhappy times, one needs financial support to help them get back up again and start anew.

Life insurance is one of the basic insurance policies every individual should have. It keeps you and your loved ones secure by providing financial compensation when the terms of the policy are met. Even if you’re still young, getting an insurance policy for yourself is definitely a worthwhile investment. If you don’t have any insurance yet, try starting out with a life insurance to secure yourself.

There are basically 2 major types of life insurance – the term insurance and whole life insurance. Read along to learn more about their different features and which one you think is best for you.

Term Life Insurance

Compared to whole life insurance, term is a lot simpler when it comes to policies. As the name suggests, the insurer only pays the beneficiary within the term of the policy. Most term insurances range between 1 to 30 years at most but it also depends on what the insurer offers.

Once death happens to the insured within the said years, the insurer will then pay compensation to the beneficiaries. Usually, term life insurance doesn’t have other provisions in its policy, however, you can choose from 2 types – level term and decreasing term.

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For level term, the amount of benefit doesn’t change all throughout the duration stated in the policy. In decreasing term, the amount of benefit drops slowly throughout the course of the policy. It usually happens in one-year increments. Majority of the people opt for level term because of its fairness when it comes to compensation. You could compare life insurance types first before deciding which one is best for you.

Whole Life Insurance

Also known as permanent insurance, this policy type provides a compensation whenever the insured faces death. It doesn’t have a limit in the years of term – whether the insured reaches a very old age, the beneficiaries can still receive the benefits of the insurance term. In this type of insurance, the client should pay a certain amount regularly for the specific inclusions that he wants to have in his policy.

Usually, this is coupled with a savings account where the dividends will go to after settling every payment. The longer time goes by, the more this savings will grow. Usually, insurance companies charge a higher premium in the first few years of payment. As time goes by, clients will be charged a little lower than it was on their first few years. This is to supplement the lower premiums charged as the client gets more advanced in age.

If you’re looking for a great personal investment that is totally worth it, buying yourself a life insurance is one of the best ways to do so.