Life Insurance Types

Before you apply for the best term life insurance rates, you’ll want to know what type of life insurance is best for you. Here is an explanation of the common types of life insurance to help you decide what policy is right for you.

Term Life Insurance

Term life insurance is usually the cheapest and most straightforward type of life insurance. Term life provides protection for a specified term, usually 10, 20, or 30 years. If your death occurs while the policy is in effect, your beneficiaries will receive a death benefit. If you are still alive when the term is up, your protection expires unless you renew the policy. You do not accumulate cash value with term life insurance, so it does not double as an investment vehicle. Here are some pros and cons to consider when shopping for the best term life insurance rates:

  • Provides temporary coverage for people who need it
  • Gives large amount of protection for small cost
  • Can convert into permanent life policy in most cases
  • Receive death benefits income-tax free
  • Can be used to supplement other coverage when you need extra protection
  • Premiums will increase as you age and might become unaffordable
  • Doesn’t build cash value and coverage ends unless you renew

Permanent Life Insurance

When you are shopping for the best term life insurance rates, you might also consider permanent life insurance for more lasting coverage. As its name implies, permanent life insurance offers coverage over your lifetime, or with some policies, up to a certain age at which you are paid the policy’s cash value. Permanent life insurance policies also double as investment tools, as they can accrue cash value over time. With some policies, you can borrow against this value or withdraw it to cover expenses like college tuition. The pros and cons of permanent life are:

  • Build cash value on tax-deferred basis over time
  • Provides a lifetime of coverage with consistent premiums
  • More economical than term life in the long-run
  • Can withdraw or borrow against cash value
  • Permanent life is initially more costly than term life
  • Loans against the cash value reduce the death benefit
  • Canceling or surrendering the policy may subject you to taxes on its cash value