Death is an uncomfortable subject, particularly when discussing your death or the passing of someone you cherish. But death is one of the only assurances in this world, and life insurance can protect your loved ones when it hits close to home.
There are many different types of life insurance and not all are created equal. The type you seek should depend on your individual life goals and financial commitments. As your life situations change, your life insurance policy will likely need to be adjusted.
Different types of life insurance
There are two main types of life insurance, namely term and whole life.
Term Life Insurance
Term life insurance is the most basic type of life insurance. It is only paid out if death occurs within the time frame that the insurance policy covers, which usually ranges between one and thirty years. Most term insurance policies don’t have additional benefit clauses. The initial cost of term life insurance is less expensive than the alternative. However, rates increase as you get older.
People frequently purchase term life insurance policies to protect their children and spouse. If the policyholder dies during their working years. The benefits for term policies are paid out in one lump sum instead of regular instalments.
There are two main kinds of terms for term life policies. If you see the term “level” in your policy, it means the amount of life insurance remains unchanged throughout the insurance policy term. The other option is a decreasing term, which is usually a lower cost and implies that the death benefit decreases in one-year increments throughout the policy’s duration.
Life Insurance products designed for groups differ compared to life insurance sold to individuals. The group life insurance product is a product that cannot change in cash value. An employer generally provides insurance for the length of your employment. But it can end when you retire from your job. Limits are set by your employer and may require you to take part in a medical examination.
Whole Life Insurance
Whole life insurance, often called permanent life insurance, provides several death benefits with no matter when you die, even if you live to 100. Complete life insurance plans accrue cash value over time as determined by a fixed interest rate and premiums that are paid by the insured throughout their lifetime. Whole life insurance plans can accumulate tax-free over time and can be used as a tool for estate planning if you have wealth you want to protect and then transfer to beneficiaries. This is why premiums tend to be more expensive than term life rates.
There are three kinds of whole life insurance:
- Traditional whole life is a kind of insurance designed to ensure that both death benefits. The premium remains constant throughout the insurance policy.
- Universal life allows policyholders to alter their premiums or coverage amounts over their lives rather than being locked in at a fixed rate for the duration of their policy.
- Variable universal life enables an amount of cash in the insurance policy to work as an investment fund.
Traditional life insurance
With traditional life insurance policies, insurance companies can charge a price that grows each year. However, this can quickly add up and become prohibitively expensive for many people later in life. With permanent life insurance, the insurance company maintains the cost of premiums by charging more than what is required to cover claims in the beginning years. They invest this money and use it to increase the premium level to pay for the cost of life insurance coverage for elderly individuals.
In some cases, when overpayments exceed a certain amount. They become available to the policyholder in the form of cash value should they decide not to stick with the initial plan.
The underwriting process for life insurance
Life insurance policies all have some underwriting, though the type of insurance you choose will determine the degree. For instance, for the whole life insurance policy, you’ll likely need to undergo a complete underwriting and a medical exam and a credit screening. Your physician will most likely need to provide a complete medical history. For cheaper term group policies, all you might have to do is answer a few questions and sign paperwork.
New Jersey Life Insurance Agents
A complete life insurance policy in NJ can be a welcome aid to your grieving family if you pass away. However, choosing the right plan is complex and emotional. Insurance professionals can assist you in understanding your options and help you pick the best policy for your family.
