The Most Common Types of Life Insurance Policies

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Just why is life insurance so important, and how you do pick out the policy that’s right for you?

Many people don’t realize that life insurance policies are very worthwhile investments; although no one wants to think too much about the situations that might require a relative to use a life insurance policy, it’s still important to be organized and plan for these possibilities.

It’s important to understand that, similar to health insurance policies, there are several different types of life insurance plans to fit the needs of the policyholder. Here’s a quick overview of what the main types look like:

Universal life: This combines term insurance values with a monetary investment that pays a market-value return. Higher returns aren’t guaranteed with these policies because the return depends so much on market values, so this type of life insurance isn’t one of the more common types.

Variable life: This is a permanent policy that includes an investment fund with stocks or bond mutual-fund investments. Similar to universal life policies, returns aren’t always guaranteed with variable life policies (but financially-savvy individuals sometimes prefer to take the risk).

Term life: This is probably one of the simplest and most secure types of life insurance because it doesn’t involve any sort of investment. With term life, you buy coverage for a certain length of time as long as you pay the required monthly premium. Term life insurance can be purchased annually, making it a smart investment that doesn’t plan too far into the future.

Whole life: This is again a straightforward type of insurance policy, but unlike term life policies, whole life policies provide coverage for your entire life. This tends to be a more popular option for adults who have the funds to invest in a solid policy.

Many Americans — young and old — are beginning to realize that life insurance policies are very important. So the question to ask yourself now is, have you purchased the right policy for your needs?

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