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Types of life insurance

Not all life insurance policy types are the same. Understanding them can help you decide which life insurance policy is right for you.

If you've been putting off getting life insurance because it feels overwhelming, you’re not alone. One of the main reasons people put off getting life insurance is because they think it’s going to be too complex, and they don’t know where to start. Here we break it down, so you have a place to start.

What are the different types of life insurance?

There are two main life insurance types – term and permanent. Both offer protection in the form of a death benefit paid to beneficiaries; however, term coverage is temporary and only lasts for a certain amount of time, whereas permanent coverage lasts your entire life.

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Term vs. permanent life insurance

Term life insurance

Term life insurance is coverage that lasts for a specific term or length of time (commonly 10, 20 or 30 years). 

The way it works is if the insured dies during the specified term, beneficiaries will receive the death benefit on the policy (provided that premiums are paid as required to keep the policy in force). However, if the insured is still alive at the end of the specified term, the guaranteed level premiums will end, and the policy automatically renews every policy anniversary (up to the insured's age 95), albeit at a much higher rate. It's the insured's choice whether to continue the policy, convert it to permanent coverage, or cancel the coverage at the end of the guaranteed level term period.

Whether it's term or permanent insurance, the golden rule is to get the coverage amount correct. To get the proper amount of benefit so the family is taken care of.

Patrick Blevins, State Farm® agent, Lexington, VA

Permanent life insurance

Permanent life insurance is coverage that lasts your entire life. State Farm offers the following options for permanent life insurance — whole and universal. Permanent is typically more expensive compared to term, but that’s because it lasts your entire life. Permanent life insurance also provides cash value.1 That value can be used for life emergencies, such as helping with education costs, or you can let it grow tax-deferred.2 As the owner of the policy, the choice is yours.

Whole life insurance

Whole life is permanent life insurance that offers a set amount of coverage along with level premiums that will never change while the policy is in force. The death benefit, premium, and cash value are guaranteed as long as premiums are paid as scheduled. In addition, whole life is eligible to earn dividends. And although not guaranteed, the dividends can accumulate at interest, purchase paid-up additional insurance, reduce the annual premium, or be paid in cash. The choice is yours.

Universal life insurance

Universal life is permanent life insurance with more flexibility allowing you to adjust your coverage and premiums over time to better suit your needs. Whether you need to increase your coverage due to a new family member, or increase premiums to help build tax-deferred account value, Universal Life gives you options.

Is there a best type of life insurance?

Determining what life insurance is right for you and how much life insurance you need depends on your own individual situation. For some, term may be better due to its initial affordability, whole life for its guarantees, or universal life for its flexibility. Some people find that one type of policy satisfies all their needs, while others may select a combination of different coverages. Every situation is as unique as the customers we serve. Having choices allows you to put together a life insurance plan that fits your life and budget.

Mr. Blevins shares that “State Farm has a product, and a price point, for most customers.” Get a quote for life insurance  — and if you are interested in additional life products, please contact a State Farm agent.

You might also want to explore the Life Enhanced® mobile app for guidance and motivation to help strengthen key areas of your overall wellness. The app provides access to a wide variety of activity goals, educational materials, and digital tools that help you achieve physical, emotional, social, and financial well-being.

1 Only four withdrawals are allowed per year ($500 minimum per withdrawal). Surrenders may be subject to a surrender charge. Unpaid loans and withdrawals will reduce the death benefit and the policy's cash value. Withdrawals also will reduce the policy account value/cash surrender value. Loans accrue interest.

2Permanent life insurance develops cash value that can be borrowed. Policy loans accrue interest and unpaid policy loans and interest will reduce the death benefit and cash value of the policy. The amount of cash value available will generally depend on the type of permanent policy purchased, the amount of coverage purchased, the length of time the policy has been in force and any outstanding policy loans. There may be tax consequences associated with policy loans.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Each State Farm insurer has sole financial responsibility for its own products.

State Farm Life Insurance Company (Not licensed in MA, NY or WI)
State Farm Life and Accident Assurance Company (Licensed in NY and WI)
Bloomington, IL

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