Life insurance policies are generally divided into two distinct categories. These are Term and Permanent life insurance. Term policies are those that provide coverage for a set or limited amount of time. On the other hand, Permanent policies are those that provide coverage for the rest of your life.
Within these two basic categories, however, are a few sub-variants of each kind of policy. In this article, we will cover 6 different types of permanent insurance, outlining what they are and what makes them unique. If you are struggling with figuring out which permanent life insurance policy will serve you and your family best, this article is for you.
1. Whole Life Insurance
When people talk about permanent life insurance, they usually mean whole life insurance. Whole life policies offer a level death benefit. This means that the death benefit received from the policy will remain the same no matter the age at which the policyholder passes away.
Whole insurance policies also offer level premiums, which are the regular payments made as part of your contract. What is more, whole life policies have the potential to earn cash value for the policyholder over time and also offer living benefits that can be borrowed via a policy loan.
2. Universal Life Insurance
Universal life insurance is similar to Whole life in that it is permanent, but it is different in that it is generally a more flexible policy to opt for. With a universal life insurance policy you get to set the guaranteed number of years that the policy will be active, as well as the timing and amount of premiums.
Like Whole insurance policies, universal life offers the potential to build cash value over time, as well as the option to take out policy loans when you need them. The main takeaway for universal life insurance is that it provides you the flexibility to adjust your planning and premium payments.
3. Indexed Universal Life
Indexed Universal Life (IUL) insurance provides all the same benefits as universal life insurance does, except for the fact that with IUL, interest can be credited to your policy. An IUL offers the option to earn interest with respect to the performance of a particular market index.
4. Variable Universal Life
Variable Life Insurance offers all the benefits of Universal and Indexed Universal Policies. However, a VUL also allows the policyholder to structure the way in which they want cash value in their policy to be directed. This cash value could be directed towards stocks and bonds. In this way, VUL offers the potential for faster growth but with a higher risk involved.
5. Survivorship Universal Life
Unlike other permanent life insurance policies, Survivor Universal Life (SUL) delays the death benefit until the second surviving partner of the policyholder has passed away. Once this happens, the death benefit is paid in full. This insurance policy best serves those who are married and is more affordable than investing in two individual permanent life policies.
6. Joint First-to-Die Life Insurance
Joint First-to-Die life insurance is a policy that is designed to cover the lives of two people at the same time. This is typically a couple, and this type of policy pays out the death benefit upon the death of one person. This is a much more affordable way to share a policy with your spouse rather than buying two separate life policies.
To Sum Up
Permanent life insurance is a popular financial investment made by people who are concerned about the long-term financial planning of their loved ones. According to the varying needs of policyholders, permanent life insurance can take any of the above 6 forms.
Each of these different types of permanent insurance provides coverage in different ways and is designed with different needs in mind. In order to choose the right one for you, it is important to assess your financial needs beforehand.