A Guide to the Major Types of Life Insurance

In 2020, only a little over 50% of Americans had life insurance. Life insurance policies are designed to pay out if the insured dies, usually to his or her beneficiaries. It’s meant to act as a financial safety net that keeps the family afloat financially after an unexpected death.

The thing is, though, there are many types of life insurance policies. How do you know which one would fit you best? This guide will explore the different life insurance types and help you make an informed decision.

Term Life Insurance

This type of life insurance is exactly like it sounds: temporary. The term of coverage on these policies vary, but they are designed to cover expenses only during the term mentioned in the policy.

At the end of this time period, the policy will expire with no payout. This is not to be confused with endowment policies, which are similar but cover the insured for a longer period of time.

Whole Life Insurance

As opposed to term life insurance, whole life is permanent coverage that does not expire at any given time. It provides payments to beneficiaries upon the insured’s death, regardless of the time span.

This type of life insurance is more expensive due to its permanence. For those in the military, military life insurance serves as whole life insurance.

Universal Life Insurance

This is one of the most popular types of life insurance policies. It’s a combination approach between term and whole policies.

Universal life insurance provides coverage throughout the beneficiary’s lifetime but can be canceled at any given time. These are also known as flexible premium policies.

Group Life Insurance

Also called employer-provided life insurance, this type of coverage is offered in large quantities to employees and their families in place of a salary raise. Depending on the policy and company, premiums will be deducted from paychecks or paid entirely by the corporation. This type may also be accompanied by additional features such as accidental death benefits.

Accidental Death and Dismemberment Insurance (AD&D)

This type of life insurance is meant to protect the insured’s family by adding an additional payout in the case that he or she dies from a specific accident, such as a car crash. AD&D can be purchased with other types of life insurance, such as whole life, but it does not have to be.

Social Life Insurance

This type of policy is offered through an organization (typically a non-profit). The insured pays monthly premiums and, in turn, receives money if he or she dies because of something specific, like suicide. This insurance is typically used by groups that know the specific risks of their members, such as firefighters.

Individual Life Insurance

These policies are designed to provide coverage for a single person and his or her family in the case that he or she dies. Some individuals may choose this type of insurance if they do not have access to group plans through jobs or organizations that they belong to.

Different Types of Life Insurance

There you have it! These are the different types of life insurance policies to compare.

Go through them and choose the right one. From there, check out our blog, where we have more helpful articles.