Types of Life Insurance – Easy to Understand Reference Guide

Many life insurance companies specialize in offering different types of life insurance policies. It can also be difficult to know which life insurance company can offer you best types of life insurance for your unique planning needs.

Affordable Life USA helps individuals and business owner's identify the perfect type of life insurance policy to compliment their overall financial plan.

We have streamlined the process of shopping for life insurance and monitor a network of many life insurance companies.

If you eventually choose to work with us, we promise to work diligently with you from start to finish to locate the appropriate type of life insurance plan for your needs and budget.

What are different types of life insurance policies?

Look no further! To learn about the different types of life insurance reference any of our helpful article links.

The different types of life insurance explained in our articles should help you in deciding the best plan for your needs.

So, please dive right in! Our helpful reference guide is guaranteed te help you understand the best type of life insurance fo your family.

Types of Term Life Insurance

types of life insuranceWant to know more about term life insurance? Please reference the different types of life insurance explained below:

Basic Term Life Insurance

What is term life insurance?A term life insurance policy offers guaranteed level death benefits and level premiums for an initial period such as 10, 15, 20, or even 30 years.

Term life insurance is an excellent choice for applicants looking to obtain the largest amount of insurance at the cheapest cost.

Many people also ask, what does level refer to in level term insurance? The best way to explain level refers to how long the premium will remain at the same price.

We have found the best way to help people gain a better understanding of life insurance policies are with practical examples.

For example, a 10 year term life insurance policy will always have a level premium for 10 years.So, a 10 year level term plan may be ideal for someone in their 50's looking at protecting their income to until they retire.

While, a 20-year term or 30 year term life insurance plans have level premiums for  longer duration's of either 20 or 30 years. These level plans may be better suited for younger people needing to protect a long term mortgage, or for those needing to protect their income to surviving family members.

As you can see, term coverage can be always tailored in duration to address your exact future needs.

Return of Premium Term (ROP)

What is ROP term life insurance? Return of premium term life is a great type of term life insurance that guarantees the return of all of your premiums at the end of your term.

Most companies that offer ROP term often reference it in their policy language as a  return of premium rider

So, when purchasing term insurance with  return of premium, if you are still living at the end of the term period, 100% of your paid premiums are guaranteed to be returned to you tax free.

Depending on your age at the end of your ROP term life, this money can also be applied towards extending the duration of your coverage. This policy option is commonly referenced as a conversion option.

Convertible Term Life Insurance

What is convertible term life insurance? Convertible term life insurance allows active policyholders to extend or convert life insurance to permanent coverage without requiring any medical underwriting.

Many people outlive their initial term coverage without realizing that the duration of their coverage could have been extended by exercising a life insurance conversion option.

However, if your 10, 15, or 20 year policy is a convertible term life insurance  you are in luck!  Convertible term life insurance can be exchanged for longer running permanent life insurance.

Converting life insurance is also easier then applying for new coverage. With a term life conversion, you will automatically qualify with no medical questions and no exam required.

Mortgage Protection Term Life Insurance

What is mortgage term life insurance? Mortgage life insurance pays off your mortgage upon your death.With mortgage protection life insurance the death benefit will be directly linked to the amount of your mortgage balance. So, your mortgage life cover will decrease as your mortgage balance gets paid down.

These types of life insurance policies are sold by banks or mortgage lenders and are also referenced to as either mortgage life insurance or mortgage protection life insurance.

Mortgage life insurance is often is sold by banks as part of closing during a new home loan. However, the branded name and ease of purchase are much more expensive compared to term life insurance purchased in the open marketplace.

A more flexible and cheaper option for borrowers is to get mortgage protection life insurance rates from an independent agency.

Group “or” Company Term Life Insurance

What is group term life insurance? Group term is one of the types of term life insurance offered by employers as a benefit to their employees. With a group life insurance policy, the insurance contract is between the group and the insurance company, with each employee receiving a certificate of coverage.

It is easy to qualify for this type of life insurance because there are no medical questions. Company insurance is often offered as a factor of your income, at no cost as part of your normal benefits package.

Many company sponsored plans also allow employees to purchase additional amounts of voluntary coverage at group rates. You will need to pay a premium for the additional coverage at the published group rate. Most additional coverage requires a brief questionnaire about your medical history and occasionally an exam.

How much does a term life insurance policy cost?

To compare term life insurance rates, please press “Get Quote” below:types of life insurance quotes

Types of Permanent Life Insurance

Types of Permanent Life Insurance

Permanent life insurance comes in many varieties but can be mainly classified into two basic categories: Universal Life and Whole Life. To learn more, please reference the different types of life insurance explained below:

Universal Life Insurance 

What is universal life?  Universal Life Insurance is another type of permanent policy where the excess of premium payments above the current cost of insurance are credited to the cash value of the policy.

Universal life insurance can be designed for cash accumulation that acts similar to a savings account with tax deferred growth along with lifetime coverage.

Universal life can also be structured at competitive price point with no cash value with guaranteed coverage to last a lifetime. These policy designs are often referred to as Term/UL or hybrid universal life insurance.

Hybrid Universal Life

What is hybrid universal life?  As mentioned, hybrid universal life is also referenced as Term/UL by many  life insurance companies. Hybrid insurance is a type of permanent life insurance which can behaves similar to term coverage with the premium and death benefit guaranteed to a specific age (i.e. age 85, 90, or 100).

Hybrid universal life insurance builds very little cash value but, offers you the most affordable long term coverage. This competitively priced life insurance policy that is not sold by all life insurance companies.

Indexed universal life

What is indexed universal life? Indexed Universal life are often referred to as IUL's and are a type of universal life policy.

A indexed universal life insurance policy gives you the opportunity to allocate your cash value to either a fixed account or an equity index account.

Indexed universal life policies usually offer a variety of index's to select from, such as the Dow Jones, S&P 500, and the Nasdaq.

Here is very brief summary of how your cash values work:

  • The cash value inside of a indexed universal life policy grows as a result of index performance.
  • Your selected index performance gains are normally capped at a certain specified percentage when you buy your coverage.
  • However, life insurance companies can also change your cap as well.
  • The good news is that if the index does go down in value, you will not lose any money.

Interest Sensitive Adjustable Life 

What interest sensitive life insurance? Interest sensitive life insurance is also referenced as as flexible premium adjustable life  by many life insurance carriers.

Although still sold today, this type of life insurance was more popular a few decades ago. The important feature to remember about Interest sensitive adjustable universal life typically does not have guaranteed premiums.

When you contribute premiums, the insurance company deducts for expenses, including the cost of the death benefit, and the rest of the money stays in the policies cash value earning interest to help pay some of the future costs.

Unlike whole life’s guaranteed cash value, adjustable life insurance has a fluctuating interest rate on the money contributed towards the cash value.

variable life insurance

What is variable life insurance? A variable life is a type of life insurance which provides a fixed premiums and death benefit. However, this insurance policy has cash values which are invested in  a series of sub-accounts where you can get growth, or you can also lose money depending on the market. 

These sub-accounts behave like mutual funds, meaning your cash values can fluctuate based on the performance of the bond and  stock market.

People with higher risk tolerance usually will consider this policy along with it's sister policy variable universal life.

Whole Life Insurance 

What is whole life insurance? First, it is important to realize that whole life is also referred to as ordinary, standard, or permanent life insurance.

Whole life insurance definition: Whole life is a type of life insurance which provides a fixed premiums and death benefit for the lifetime of the insured. As long as the required premiums are paid, this type of policy will remain in force for your whole life.

Whole life insurance policies also accumulate guaranteed tax-deferred cash values. These cash values are available upon surrender, or by taking withdrawals or loans against an active policy.

Whole life is ideal for people looking to obtain a small policy to pay for final expenses, or for affluent people looking for a larger policy to create an estate for their family.

Getting competitive whole life insurance rates is not always is easy because it is not sold by all life insurance companies. Whole life insurance is also more expensive compared to other forms of permanent coverage like universal life.

Survivorship Life Insurance

What survivorship life insurance?  Many wealthy people use Survivorship Life Insurance, also known as “second-to-die life insurance”and “joint survivor life insurance to protect their estate.

A survivorship life insurance policy is set up to insure married couples, and type of policy does not pay out until the surviving spouse dies.

Second-to-die life insurance allows couples with significant assets to pass them down to children and avoid having to sell off everything at fire-sale prices to pay federal estate taxes owed after both spouses die.

How much does it cost for Universal life insurance?

To easily compare universal life insurance rates  click “Get Quote” below:

affordable life insurance quotes

Types of Life Insurance Chart

Feature

Term

Whole

Universal

Indexed

Variable

Choices in policy duration  ✓ ✓ ✓
Builds cash value 
Premiums can be flexible  

Death benefit can be flexible  
Inexpensive life insurance
    
Cash value has investments    
 Lifetime coverage  ✓ ✓ ✓ ✓

Introducing Eric Van Haaften:

Eric Van Haaften

Affordable Life USA is a nationally licensed and independently operated life insurance agency. The agency was started by Eric Van Haaften, over 25 years ago, from our home office located in Grand Rapids, Michigan. Please feel free to email him at: eric@affordablelifeusa.com, or call us at 1-877-249-1358.