Types of Life Insurance: Compare Policies and Benefits

types of life insurance

Life insurance policies aim to ensure that your loved ones are better prepared, to face the harsh financial consequences of your death. There are a large number of life insurance agencies operating successfully in the US. Most of them have been insuring their policyholders for longer than a century now.

Different life insurance policies are suitable for different people. You have to choose the right one for yourself. It is advisable to either consult a financial advisor or an independent broker to select the right fit for yourself.

Ensure that you choose a reputable company and one of its best policies, for satisfying your financial after-death concerns. There are several types of life insurance policies, broadly these can be categorized as follows:

  1. Term Life Insurance Policy
  2. Whole Life Insurance Policy
  3. Universal Life Insurance Policy
  4. Variable Life Insurance Policy
  5. Burial Insurance

The other life insurance types include:

  • Group Life Insurance Policy
  • Survivorship life insurance
  • Mortgage Life Insurance Policy
  • Hybrid Life Insurance
  • Simple Issued Life Insurance

Compare Different Types of Life Insurance

These represent the basic life insurance options available, outlining the specific coverage given by each.
Types Of Life InsurancePolicy LengthPremiumsCash ValueDeath Benefits
Term Life5-35 & 40 yearsLevel, annual renewable, decreasingNoFixed
Whole LifePermanentLevelYesFixed
Universal LifePermanentFlexibleYesFlexible
Variable LifePermanentLevelYesFlexible
Burial LifePermanentLevelYesFixed

Term Life Insurance Policy

It is temporary and best suited for youngsters in the age range of around 20-40 years. It usually lasts for a certain specified term ranging from 5, 10, 15, 20, 25, 30, 35, and 40 years. The longer the term you select, the higher the monthly premiums. Also Read: Whole Life Insurance: What are its Different Types? It does not offer a cash value component and can be useful for beneficiaries if the policyholder dies within the policy term. If you outlive your term, it expires and you have 3 options:
  1. Sell it-life settlement
  2. Convert it into a permanent life policy
  3. Buy a new term life policy
Term life insurance policy benefits the people who cannot afford the mighty pricey premiums of a permanent policy. The premiums for a permanent policy are 5-15 times higher than that of a term policy. If you buy longer terms like 30-40 years and die within the term, it is an awesome policy. It pays out a complete death benefit to your dependents, in that case.

Whole Life Insurance Policy

It is a type of permanent life insurance policy that relieves you of the stress of keeping a check on the expiry date. It lends you a certain peace of mind. The leveled, never increasing premiums are offered for a whole life insurance policy. The premiums are awfully expensive compared to those for term life, though. The premium you pay goes 3 ways:
  1. Part of it goes to your death benefit payout.
  2. Part of it goes to build your cash value.
  3. Part of it covers the insurance agency’s per-head and operating costs.
Since it allows you to build your cash value over decades, till your death. It gives you a certain sense of financial security. Policyholders can borrow a life insurance loan against the cash value, if some emergency befalls them, once in their lifetime.

Universal Life Insurance Policy

The universal life insurance policy is also a permanent one in nature. It imparts you peace of mind and offers leveled premiums. It also has a guaranteed death benefit payout and builds a cash value component over decades. It is different from life in a few aspects though. It is not as simple and upfront as a whole life insurance policy. It has many other types of universal life policies. A typical universal life insurance policy offers a cash value account that has a flexible market rate-based interest rate applicable to it. With the market, the interest rate changes and grows the value component over time too. Apart from that, a typical popular type of Universal life is an Indexed Universal Life insurance policy. IUL generally invests somewhat safely in the indices and stocks, but the losses are minimized through the flooring options. It is for people who can bear the risk of stress. One can borrow the life insurance loans from the cash value in time of need for once in their lifetime too.

Variable Life Insurance Policy

This is also a permanent life insurance policy with a fixed premium for life. It also builds a considerable cash value account and offers a guaranteed death benefit payout after the policyholder’s demise. It is different because the cash value account builds up through investment in mutual bonds and stocks. If the investment goes in your favor, you gain growth in the cash value but in case of losses, your cash value account suffers slow build-up.

Burial Insurance

It is one of the types of whole life insurance which covers only the immediate final expenses, after the death of the policyholder. Burial insurance is also a permanent life insurance policy. It offers lesser coverage of around $5000-$50,000 usually. A presentable funeral ceremony generally charges a family around $10,000-$15,000 max.

The burial insurance has minimal fixed premiums and covers you till your last breath. The amount from this can be retrieved in 24-48 hours after your claim from the insurance agency is approved. The approval requires you to:

  1. Call the insurance agency at the death of the policyholder and inform them.
  2. Forward the corpse picture to the agency.
  3. Forward them a copy of the death certificate of the policyholder.
  4. Send a copy of the signed beneficiary statement to the agency.
  5. Make a claim.
  6. After approval the mentioned beneficiary goes and collects the check from the agency.
  7. Sends this check to the funeral home to set up a funeral ceremony.

The funeral ceremony has the following charges:

  • Funeral arrangements, 
  • Flowers, 
  • Memorial services, 
  • Burial charges, 
  • Digging grave and covering the grave expenses, 
  • Headstone cost, 
  • Urn cost, 
  • Casket cost, 
  • Cremations cost, etc. 
  • Cremation process costs less compared to the natural burial process.
  • Burial insurance pays for other smaller medical post-hospitalization and pre-hospitalization charges. 
  • It also pays up for the small pending credit card loans.

Other Types Of Life Insurance

The other types of life insurance policies include:

Group Life Insurance Policy: Offered by employer agencies for employee groups. Usually term life.

Survivorship Life Insurance: Survivorship life insurance, also known as second-to-die insurance, covers two lives and pays out the death benefit after the passing of the second insured person.

Mortgage Life Insurance Policy:
A check is given directly to the mortgage company to pay off your loan.

Hybrid Life Insurance: Hybrid life insurance combines life insurance coverage with long-term care benefits, offering policyholders both protection for their loved ones and financial support for potential healthcare expenses.

Simplified Issue Life Insurance: Simple Issued Life Insurance provides a quicker and easier application process with no medical exams, offering a simplified way to obtain life insurance coverage based on a simplified underwriting process.