Life insurance is a good idea if you have a family or dependents. In the US, life insurance is pretty popular amongst those who can afford it. It is accessible for everyone, and it can be purchased easily.
But before buying a life insurance policy, you should know the different types available in the US. You should also know the terms involved to avoid purchasing a policy that won’t be suitable for your situation.
If you don’t know what life insurance is and how it works, refer to this article >>
Different types of Life Insurance in the USA
There are many different types of life insurance policies available in the US that you can purchase. Each type has specific features and benefits depending on your needs, goals, and financial situations.
Here are some of the most popular and common life insurance you can find in the US:
1. Term Life insurance
Term life insurance is one of the most common forms of life insurance policies in the US. This policy holds for a specific period, usually between 10-30 years, depending on your age and health status. Term life policies are inexpensive compared to other types of coverage.
The premiums you pay cover only that specific term, but there is an option to renew the policy. Some companies offer a fixed rate, while others allow it to be variable according to market conditions.
This type of life insurance is suitable for people about to start building their families or need the coverage only for a short period, like 7-15 years. It can also be an affordable option for your first-time insurance coverage.
2. Whole Life Insurance
Whole life insurance covers you for the entire span of your life without any time restriction. This life insurance policy is more expensive than Term policies.
With this type of policy, you can build up equity that would be paid out on maturity or death. The cash value of this policy increases by deposits you make and premiums paid. Additionally, it is suitable if you can afford higher premiums because rates do increase with age.
This type of policy offers guaranteed death benefits as well as guaranteed cash value.
3. Universal Life Insurance
Universal life insurance offers the same features and benefits as whole life insurance but at a much lower initial cost. The premiums can be adjusted for different ages, and you can increase or decrease coverage anytime, depending on your needs and goals.
The downside to this policy is that the cash value of the policy is not guaranteed. Hence, you have to pay more in order to get paid out on maturity or death since there are no guarantees. As a result, universal life policies are not suitable for everyone.
It’s only suitable for people looking to purchase life insurance for the first time or those willing to take more risks.
4. Variable Life Insurance
Variable insurance provides you with investment options that allow your funds to grow over time. The cash value of the policy can increase or decrease depending on your earnings and expenses.
There is a death benefit, but it is not guaranteed like whole life insurance. But there are other features such as loans and cash surrender that you can take advantage of to help with financial needs.
This type of policy works best for people who expect to pay lower insurance premiums for the same coverage as other plans. It is also suitable for those willing to take on more risk with their investments and want higher returns.
5. Group Life Insurance
Group life insurance works best for people who are working for big organizations. An employer buys a group life insurance policy on behalf of its employees to provide them with financial protection.
The premiums paid for this type of coverage will depend on the size of the group and the benefit amount for which you qualify. You can also choose a fixed or variable payment option, depending on your needs.
6. Return of Premium Term Insurance
Return of Premium Term Insurance is a variation of term life insurance policy. It returns the premiums paid in full if you survive the specific term for which you have insured yourself.
This type of coverage is best for people who need protection only for a short time and cannot afford to invest in a whole life policy. It is also suited for people who do not want to take out an expensive life insurance policy.
If you want to make sure you get your money back if you don’t need the coverage anymore, this policy is suitable. But note that you won’t get back the service fees associated with this policy.
7. Guaranteed issue life insurance
Guaranteed issue life insurance is usually the cheapest type of life insurance available. It does not require any kind of medical exam, making it easy for anyone who needs coverage to get it.
But you should be aware that this type of policy comes with reduced benefits and high premiums, making it unsuitable for most people. Not only that, but the policy expires within a very short time, giving you coverage only for a short period.
It’s suitable for people who cannot afford a regular life insurance policy and people with pre-existing medical conditions.
8. Simplified issue life insurance
Simplified issue life insurance is usually purchased by people who have had a normal application for a policy denied due to health or other issues.
This type of coverage provides you with basic death benefits and cash values at the lowest possible cost. But it does not provide any guarantees, so you should be aware that your premiums will have to be high in order to get decent coverage.
One of the benefits of simplified issue life insurance is that you can also purchase it in many foreign countries in addition to your home country. If you are planning for an extended trip or move overseas, this type of insurance might be just right for you.
As you can see, there are many types of life insurance policies available, each with its features, pros, and cons. You should find a policy that is right for you according to your needs and budget, as well as your age, health, occupation, and the kind of coverage you need.
The best thing you could do is to contact a life insurance agent to clarify all your doubts. That way, you will know exactly what type of coverage would be best for you and your family.