Term and whole life insurance are the two most common types of life insurance.
Traditional whole life, universal life, variable life, and variable universal life are examples of subclasses of whole life insurance.
According to the American Council of Life Insurers, 4.0 million individual life insurance policies were purchased in 2018 and 5.9 million were purchased in 2017.
Individually sold life insurance is not the same as group life insurance.
Individual life insurance is the topic of the following material.
Term
The simplest form of life insurance is term insurance.
It only pays out if the policyholder dies within the policy’s term, which is typically one to thirty years.
There are no additional benefits in most term insurance.
Level term and declining term are the two most common forms of term life insurance plans.
In 2003, almost all term life insurance purchased (97 percent) was level term.
Click here to learn more about the many types of term life insurance.
Permanent/permanent/permanent/permanent/permanent/per
Even if you live to be 100, whole life or permanent insurance provides a death benefit when you die.
Traditional whole life, universal life, and variable universal life are the three main types of whole life or permanent life insurance, with variations within each type.
Both the death benefit and the premium are supposed to stay the same (level) during the life of a standard whole life policy.
As the insured person becomes older, the cost per $1,000 of benefit rises, and it obviously rises dramatically when the insured person lives to be 80 or beyond.
The insurance firm may levy an annual fee, but most people would find it difficult to buy life insurance at their senior age.
So the corporation maintains the premium level by collecting a premium that is larger than what is required to cover claims in the early years, investing the money, and then utilizing it to supplement the level premium to assist pay for the cost of life insurance for the elderly.
When these “overpayments” reach a specific amount, the policyholder is entitled to a monetary value if he or she chooses not to continue with the original plan.
The policy’s cash value is an alternative benefit, not an additional benefit.
Universal life insurance and variable universal life insurance were two variations on the classic whole life product developed by life insurance companies in the 1970s and 1980s.
