Exploring The Different Types of Life Insurance Policies – Uses, Pros & Cons

Life insurance covers a series of characteristics and each of them comes with its own benefits. Getting the right type of insurance is certainly tricky. Most importantly, it …

Couple Signing Mortgage Documents

Life insurance covers a series of characteristics and each of them comes with its own benefits. Getting the right type of insurance is certainly tricky. Most importantly, it implies working out how much money is required to protect the ones left behind. The amount has to take multiple aspects in consideration and not just the cost of life – debts, student loans, mortgage and so on. Understanding the most common types of insurance will help considering life insurance quotes in a more efficient way.

Level term insurance

Level term insurance is the easiest to understand. It’s basic and straightforward. Basically, it implies deciding on who benefits from it, how long for and how much for. It lasts for a specific number of years, which are mentioned in the policy. Also, it pays out a certain amount of money on a monthly basis. Therefore, everything is clear and concise. It works in different ways and can cover various expenses, such as a student loan or a mortgage.

Simplicity is its main advantage because everyone can understand it. It’s basic and also affordable. It’s excellent for those with dependents, as well as people with fixed long-term debts.

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Decreasing term insurance

Decreasing term insurance is often referred to as mortgage protection. Just like the level term insurance, this one is also based on an agreed number of years. Most commonly, its duration matches the duration of a mortgage or other regular expense. It only pays out if the policy owner dies within that period of time. The payout tends to decrease overtime, just like most mortgages. The outstanding loan goes down in time, hence the insurance terms.

When compared to a level term insurance, the decreasing term alternative is usually cheaper. It’s affordable, which is a major plus, but it only covers a specific payment – usually the mortgage balance. It’s ideal for those with a mortgage, so their dependents can focus on other costs instead.

Family income benefit insurance

Family income insurance is similar to the previous types, only it pays a regular amount of money on a regular basis, rather than a lump sum. If it can match the owner’s monthly income, this insurance guarantees for maintaining the same living standards for dependents. It’s not expensive, but it has a major minus – it won’t pay out for too long if the owner passes away too late in the term.

Whole life insurance

Whole life insurance is similar to the family income benefit insurance, only it makes no difference when the owner dies. It simply covers the whole life. For this reason, it’s also more expensive. But on a positive side, dependents will get a decent payout as long as the owner keeps up with the premiums.

In conclusion, life insurance is not as simple as it seems in those cheesy ads on TV. It implies research, as well as the education to choose the optimal solution. Different policies have different terms, so it’s imperative for the potential buyer to make this purchase with their personal necessities in mind.

Author Bio

Meet Morakhiya is a personal finance and investment writer from Mumbai, India. He has been investing since he was 15 and has learned a lot through the years. He specializes in creating passive income and financial security through value investing and real estate. To get in contact with Morakhiya, feel free to reach out to him via email.

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