There are two main categories of life insurance: term life insurance and permanent life insurance. Each one of these types of life insurance has pros and cons that you should understand before you make a choice. Read on to learn about term and permanent life insurance.
Term Life Insurance: This is coverage that lasts for a certain period of time that is chosen when purchased, known as the coverage term. Typically you would purchase a term life insurance policy that covers a period of 10, 20, or 30 years.
If you die at any point during the coverage period then your beneficiaries (the people you choose to name in your plan, usually your dependents) will receive the payout amount stated in the policy, this is known as the death benefit.
If you are still living when your covered term ends, then no one will receive any of the cash payments.
Permanent Life Insurance: This type of life insurance covers you until you die. This means that no matter when you die, as long as you have been paying your monthly premium, your beneficiaries will receive a payout from your life insurance policy.
There are several types of permanent life insurance including whole life insurance and universal life insurance.
So which type of life insurance is cheaper? Term life insurance rates are less expensive than permanent life insurance rates. For this reason, term life insurance could be a good option if you are trying to save money on life insurance.
The main caveat of term life insurance policies are: if you have a term life insurance policy and you are still living when your coverage term expires, then neither you nor your dependents will receive any money.
Your beneficiaries can only receive a payout from your term life insurance policy in the case of your death during the years defined in your policy coverage contract.
Next, find out when you should purchase life insurance to lock in the cheapest rates.