Types of Modern Life Insurance
Modern life insurance policies are designed to cater to various financial goals, risk appetites, and personal circumstances. Below are the primary types of life insurance available today:
1. Term Life Insurance
Term life insurance is the most straightforward and affordable type of life insurance. It provides coverage for a specified period, usually ranging from 10 to 30 years. If the policyholder passes away during the term, the beneficiaries receive a death benefit. If the policyholder survives the term, the policy typically expires with no payout.
Pros:
- Lower premiums compared to other types of life insurance.
- Ideal for individuals who need coverage for a specific period, such as while raising children or paying off a mortgage.
Cons:
- No cash value or investment component.
- Coverage ends when the term expires, unless renewed, which can lead to higher premiums.
2. Whole Life Insurance
Whole life insurance provides coverage for the policyholder’s entire lifetime, as long as premiums are paid. It also includes a savings component, known as cash value, which grows over time on a tax-deferred basis.
Pros:
- Lifetime coverage with a guaranteed death benefit.
- Cash value can be accessed via loans or withdrawals.
- Premiums remain level throughout the policyholder’s life.
Cons:
- Higher premiums compared to term life insurance.
- Cash value growth can be slow compared to other investment options.
