When getting life insurance online, it’s important to be aware of your options.
A 2022 study found that one-third of all US workers, nearly 52 million people, earn less than $15/hr. A large segment of the domestic workforce more than likely relies on multiple sources of income or financial support to be able to handle expenses. If something serious were to happen to them, their loved ones may be put in difficult financial positions.
Luckily, life insurance is there to offer some peace of mind in these trying times. It can help replace income and even take care of final expenses. But did you know that there isn’t just one type of life insurance? Depending on your specific needs, one type may be more right for you than another. So if you want to purchase life insurance, here are some common types to get you started.
The Wysh Blog
- 4 common types of life insurance
- What type of life insurance should I get?
4 common types of life insurance
Before we dive all the way in, here’s a quick rundown of the 4 types of life insurance we’re talking about:
- Term: temporary coverage for a set amount of time
- Whole: permanent coverage, fixed payment, and fixed payouts
- Variable: permanent coverage, assortment of investment options
- Universal: permanent coverage, flexible payment, and flexible payouts
This is a type of life insurance that exists for a specific number of years, otherwise known as a term. How does term life insurance work? If the policyholder dies during the term, a death benefit is paid out to the beneficiaries. If the policyholder lives past the end of the term period, they may have a chance to renew coverage, or switch coverage depending on the insurer.
Why do people go for term life insurance coverage? Well, term premiums tend to be cheaper than other kinds. How much cheaper? Comparatively, whole life insurance premiums can cost as much as 10x the amount of term life premiums! Ultimately, term life insurance tends to be better for people who want a cheaper option or want to cover a short-term need, such as replacing income, tackling rent or student loans.
This is a much more traditional type of life insurance. During a whole policy, policyholders will have fixed premiums. That just means you pay the same amount each year for coverage. When does coverage end? If you keep paying your premiums, you’re covered for your “whole” life (get it? *wink*).
A main aspect of whole life insurance is “cash value.” See, when you pay your premiums, a portion of that payment goes to building cash value for your policy, which can accrue tax-free. With this, you can withdraw money from your policy, borrow up to the cash value or even use that amount to pay off premiums. That being said, whatever you borrow, you have to put back (preferably before you die). Otherwise, your beneficiaries may face lowered death benefits due to outstanding cash value loans.
Overall, whole life insurance may be good for people who are more established and would want their policy to work as more of an investment. With whole, you can get the set payout, fixed payments, and that cash value, which could work almost as a form of savings.
Like whole life insurance, this is a type of life insurance that’s permanent (assuming premiums are paid, of course). It, too, also comes with: death benefit, premiums, and cash value. Where it differs, however, is that variable life insurance policies can come with a range of investment options.
These investment options can range from conservative to aggressive. Variable life insurance policyholders get to choose their investments but whatever gains or losses happen are their responsibilities.
As for the death benefit, policyholders can choose a fixed option or the sum of a fixed amount and the cash value that’s been accumulated. So variable life insurance policies work best for people who’d like to be more active in using their policy for investments and stocks as opposed to the more passive investing with whole life insurance.
This is a type of life insurance that, like whole and variable, comes with a death benefit, premiums, and cash value components. So what makes universal life insurance different? For one, universal policies are more flexible. Depending on the type of plan, you may be able to raise or lower your premiums and death benefits. Interest rates also play a part here, as they can affect whether you want to raise or lower your monthly payments.
There are also different types of universal life insurance, each with their own pros and cons. Looking at the bigger picture, universal may be better for folks who want more flexibility in their insurance options. This type is generally better for people who have a number of liquid assets and long-term insurance needs. If you just need the death benefit payout, universal may not be right for you.
What type of life insurance should you get?
The best type of life insurance to get really depends on your needs. If you’re someone who wants a set death benefit and coverage for the rest of your life, whole life insurance may be right for you. On the other hand, if you’re someone who just wants a financial obligation covered or some income help, term life insurance may be better for you. Then you have variable and universal types offering flexibility and investment options. Once you know what your needs are and what they could be, picking the right type of life insurance should be a breeze.
Plus, if you’re in the marketplace for a first-class term life insurance experience, then look no further than Wysh. Our application process is 100% digital and there’s no medical exam required. It all takes less time than brewing a cup of coffee and at no cost. So see if term life insurance is right for you by applying with Wysh today!