A term life insurance plan can provide you with life insurance coverage for a specific time period. If the insured person passes away during this term, which is typically between 20 and 30 years, their beneficiaries will receive a payout.
Since a term life insurance plan does not have a cash value until the insured person passes away, it tends to be more affordable than whole life insurance. Essentially, term life insurance isn’t worth anything unless the insured person passes away during the course of the term.
Whole Life Insurance
A whole life insurance policy offers a set amount of coverage for your entire life. Also known as permanent life insurance, whole life insurance will stay in effect as long as you continue to pay your premiums.
Every month, a certain portion of your premium will be distributed into a tax-deferred savings account and the value of your policy will grow over time. Although whole life insurance is more expensive than term life insurance, it’ll cover you for as long as you live. You can also use its cash value to save for retirement or meet other financial goals.
Universal Life Insurance
Universal life insurance is a type of whole life insurance. It’s more flexible than traditional whole life insurance because you can reduce or increase your death benefit and pay your premiums at any time in any amount once you’ve made your initial premium payment.
You can choose from two death benefit options: a fixed amount or an increasing benefit that’s equal to your policy’s face value plus your cash value amount. The interest in your universal life insurance policy will grow on a tax-deferred basis and increase your cash value.
Final Expense Insurance
Also known as burial insurance, final expense insurance is intended to cover the bills your loved ones may face after you pass away. It’s a type of whole life insurance that focuses on medical costs and other end-of-life expenses such as burials, cremations, caskets, urns, and more.
As long as you pay your premiums, final expense insurance will not expire. The policy will be in effect until you pass away so that your beneficiaries can receive the death benefit at that time. While the face value of final expense insurance is usually smaller than that of traditional life insurance, the premiums are as well.