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Types of Life Insurance

Term Life Insurance: Term life insurance is temporary insurance and the most affordable type of life insurance available. A premium is paid (yearly, quarterly, or montly) for financial protection in the event the insured passes away. Term life insurance has no cash value. The beneficiaries collect the face amount of the policy only if the insured dies while the term life is in force. If death occurs, the life insurance beneficiary generally collects the death benefit of the life insurance policy, free of income tax.

Guaranteed Level Term Life Insurance

Guaranteed level term life insurance is the most widely purchased form of term life insurance. Over the last 15 years it has become the most popular form of life insurance sold in the US. The premiums for this type of term life are guaranteed to remain the same over the life of the policy. The most common term periods are 5, 10, 15, 20, 25 or even 30 years.

Return of Premium Term Life Insurance

Return of premium term life insurance (ROP) does exactly what it’s name suggests. If the policies term expires before the insured dies, the policy holder is paid back the amount of money that was spent on the policies premiums. Premiums for ROP term life are higher than for regular term life insurance, but the premiums are designed to remain level. The plans are much more affordable than whole life insurance, yet, like many permanent policies, they still may offer cash surrender values if the insured doesn't die. Return of premium term life insurance policies are available in 15, 20, or 30-year terms.

Annually Renewable Term Life Insurance

Annually renewable term life insurance (ART) is term life in which the premiums go up each year to reflect the increase in the probability of your death as you get older.

Because of the increase in premiums most people would rather go with a guaranteed level term policy, but these plans are still favorable for those who only need the insurance for a year or two. Complex business deals may include this type of term life to cover costs related to the death of one of the main architects of the deal being work out.

permanent life insurance policy is a policy that provides life insurance coverage throughout the insured's lifetime. The policy never ends as long as the premiums are paid.  In addition, a permanent life insurance policy provides a savings element that builds cash value.

Whole Life Insurance: Whole life insurance is a form of permanent life insurance, which is designed to remain in effect throughout a person’s life as long as the premiums are paid. With most whole life policies the premiums remain level throughout the life of the insured. Because of this, whole life is the most common type of permanent life insurance.

Because of its higher cost than term life, whole life is more suited for people that are looking at the policy as not only insurance but as an investment vehicle that provides a vital role in efficiently transferring wealth when the insured passes away. These policies also build cash value that can be accessed by the owner of the policy if needed.

Cash values in whole life insurance policies usually have two parts: First is the guaranteed cash value. This amount usually grows during the life of the policy according to a set schedule. This amount in most cases will equal the death benefit upon maturity of the policy which usually occurs when the insured turn 100 year old.

Also most whole life policies have a non-guaranteed cash value. This amount is most commonly made up of dividends or excess interest which can increase a policies value over time.

Universal Life Insurance: Universal Life insurance allows you to pay into the policy on top of the minimum premium. The insurance company then invests the funds with returns that are put into the premiums, or left to accumulate. One subcategory of universal life insurance is universal variable life which lets customers choose what they want to invest in rather than the insurance company choosing for them.

Variable life is another one of the main basic types of life insurance. With variable coverage, you have more investment opportunities, which include stocks. This policy type is similar to universal coverage because the returns are either used towards premiums or allowed to accumulate in an account. Your beneficiary receives either the value of the policy, or the value of the policy, in addition to a portion of, or the full cash investment returns account. If you need help choosing between the policies available, speak with a trusted insurance agent or try doing additional research online.