We’ll take you through the most common life insurance policies and help you find the one you need. When you read our content and click on one of our partners’ links, and then decide to complete an offer — whether it’s downloading an app, opening an account, or some other action — we may earn a commission from that advertiser, at no extra cost to you. How do you know what type of life insurance is best for you? The most basic type of life insurance is called term life insurance, where you choose the amount you want to be insured for and the period for which you want cover. You have a couple of options. © 2020 All rights reserved. How to Pick the Right Credit Card for You. Term life insurance provides a simple, affordable way to help financially protect your family for a specific period of time – typically 10, 15, 20 or 30 years. It's affordable. What type of life insurances should the Smiths get? No-exam life insurance is a type of life insurance policy that lets you avoid a medical exam, which is typically a requirement for a standard policy. The cash value of a permanent life insurance policy grows tax-deferred over time. Most life insurance can be grouped into two main categories: term life insurance of cash value life insurance. Unlike term life insurance, a whole life policy never expires and it also builds a cash value. Unlike a term policy that expires after a certain amount of time, permanent life insurance is good for life as long as you pay the premium. Some people can buy a significant policy for as little as $20 to $30 a month. But as long as you pay your premiums, your whole life insurance policy will stay in place. If you're more comfortable with risk, you may be interested in variable life insurance. There are two main types of life insurance: Term life insurance policies: run for a fixed period of time (known as the ‘term’ of your policy) – such as 5, 10 or 25 years. And when you die (yep, we said it), the people you named as beneficiaries get the benefit. At that point, the policy is no longer in force. The premium stays the same no matter how old you are, and the death benefit is guaranteed. Life insurance works like other types of insurance. If you die while insured, your beneficiaries will receive a payout of the amount of coverage you purchased; this is called the death benefit. Forgoing life insurance purchases at a young age can be costly. Term insurance is often purchased to protect a family through a specific period. There are two main types of life insurance: term and permanent. Permanent life insurance differs from term life in two significant ways: It lasts as long as you live, and it has a cash value in addition to the death benefit (or face value). The content on DollarSprout includes links to our advertising partners. You can avoid the need for a medical exam by getting a term life policy that has a renewal guarantee. Is a Debt Consolidation Loan Right For You? Permanent life insurance is significantly more expensive than term life insurance, and you risk losing the cash value if you don't access it before you die. If the surviving spouse wants life insurance, they have to buy a new insurance policy. So consider purchasing a 30-year policy now, when it’s really affordable. This is useful if you want to reduce the life insurance payout as the balance of your mortgage declines. Term life tends to be the most affordable option because it provides coverage for a relatively short amount of time. For example, if you're 30, earn $150,000 a year, are married with six children and have a $500,000 mortgage, you will generally be able to get more life insurance than a single 55-year-old who earns $50,000 a year, has no children and owns their home free and clear. Term insurance is less expensive than whole life insurance, because you are renting the insurance. You can select your investments, adjust your coverage and may be able to modify your premium payments. If you’re considering whether or not you need life insurance, think about this: more than a third of Americans would experience significant hardship if the primary income earner passed away, according to an Insurance Barometer study. It’s a little more flexible since it doesn’t require you to get a new policy if you want to change the premium and death benefit amounts. ‘Single life’ policies cover just one person. You can also use it to pay the premiums, eliminating any out-of-pocket spending on life insurance. 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