Their are many types
of life insurance to fit individual needs and circumstance. The following
are some of the basic types of life insurance available.
Insurance - The simplest form of insurance. You purchase coverage
for a specific price for a specified period. If you die during that
time, your beneficiary receives the value of the policy. There is no
Life - Similar to term, but you purchase the policy to
cover your "whole life" not just a set period. Premiums remain
level throughout the life of the policy, and the company invests at
least a portion of your premiums. Some firms share investment proceeds
with policyholders in the form of a dividend. Many companies will offer "a
relatively low guaranteed rate of return," but in reality
pay at a rate in excess of the guarantee.
Universal Life -
You decide how much you want to put in over and above a minimum premium.
The company chooses the investment vehicle, which is generally restricted
to bonds and mortgages. The investment and the returns go into a cash-value
account, which you can use against premiums or allow to build.
- With some policies,
sometimes called Type I or Type A, the cash account goes toward the
face value of the policy on the death of the policyholder.
- With a second variety,
sometimes called Type II or Type B, the beneficiary receives the
face value of the policy plus all or most of the cash account.
- While Type II is
meant to provide a partial hedge against inflation, it demands higher
premiums as you get older than Type I.
A variation of a universal
policy, often called universal variable life, allows policyholders
to choose investment vehicles.
Variable Life -
With a variable policy, there is usually a wider selection of investment
products, including stock funds. As with a universal policy, returns
on investments can offset the cost of premiums or build in the account.
And depending on the type of policy, the beneficiaries will either
receive the face value of the policy or the face value plus all or
part of the cash account.