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An Introduction to Life Insurance

When you begin shopping for life insurance, you will find a plethora of terms specific to its policies. While there exist only two major types of life insurance – whole and term – more than ten policy types exist within those two categories. Here’s a short primer on the significant terms and policies.

Whole Life

This insurance policy provides a death benefit during your whole life so long as you pay the premiums. It also gets referred to as permanent insurance. Many of its policy types combine the death benefit with an investment fund component. 

Term Life

Juxtapose that with term life, which insures your life for a finite period, typically 10, 20, or 30 years. If you die within that time, so long as you have paid your premiums, your beneficiary will receive the death benefit.

Policy Types Within the Categories

Life insurance companies like Dalessandro Agency Inc. provide a vast number of choices. You can purchase more than one policy so that you can mix and match. Choose from the following:

  • universal life
  • variable life
  • variable universal life
  • survivorship life
  • increasing and decreasing term life

Whole life insurance policies like universal life, variable life, and variable universal life provide permanent insurance options. Each offers both a death benefit and a cash value account that lets you save money in a tax-deferred account. Universal policies invest this cash value in a money market account that earns or losses depending on the market performance. Variable life and variable universal life provide a death benefit and a cash value investment fund linked to a mutual fund with stock and bonds.

With term life, you only receive the death benefit. You show evidence of good health when purchasing the policy initially. You renew it year-to-year, but do not need to renew your proof of good health.

A survivorship life insurance policy covers more than one person. It typically pays out when the first person on the policy dies, but you can also obtain a joint and survivor policy, also known as a last to die policy. You can obtain these as a whole or a term policy.
A final expense or burial policy pays for the funeral and related expenses like the headstone and services. These small policies of about $10,000 of coverage can be permanent or term. Most life insurance policies require a medical exam, but you can find no exam policies.

A decreasing benefit policy proves popular with those who have a large mortgage to pay and want the family to be able to cover the payments. As time passes and the mortgage gets paid off, the policy benefit decreases until it reaches zero. At that time, the policy expires. An increasing benefit policy lets a young professional provide a more significant income for their family commensurate with their increased earnings.

Corporations often obtain key man life policies to protect the corporation from the effects of the loss of an executive officer, a superior salesperson, or a specialized skill player.

The variety of life insurance possibilities remains vast. Contact Dalessandro Agency Inc. of Grand Rapids, MI to learn more about your life insurance options and how we can help you provide for your family’s future now.