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.