There are two basic forms of life insurance: whole life and term life insurance. In addition to these there is a form of life insurance that pays your mortgage should you die during the period of the policy. The form of life insurance that you need depends very much upon your reason for insuring yourself against your death.
Term Life Policies
The common reason for a policy is to pay for the funeral expenses, and both types of policy will achieve this. Term life insurance provides you with protection for a set period of time: you can insure your life for one year, five years, ten or whatever period you chose, and your estate or beneficiary will be paid the value of the policy should you die during that period.
If you stay alive for the period, then you receive nothing. The policy has no value unless you die, and this is the cheapest form of life insurance policy. There is no investment involved, as with an annuity or endowment policy, just the face value of the amount you are insuring against. The older you are, and the longer the period insured, the more expensive the policy will be.
When you want to renew the policy, this can be done with or without a medical check-up, and you have to decide which when you purchase the original policy. If you want the option of extending the period without any further check-ups then it will cost you more. However, it benefits you if you contract a serious or terminal illness during the period insured. IT is also possible to convert some term life insurance policies to a permanent policy without a physical examination.
Decreasing Term Life Insurance
In Decreasing Term Life Insurance, your premiums don't change, but the amount for which you are insured reduces. This is contrary to what most people would wish, but is an option that suits some who have other insurance protection. Generally, you would want the amount you are insured for to increase rather than drop due to inflation. Many older people find that when they die the value of their policy benefits is low in comparison with today's prices.
Credit and Mortgage Life Policies
Another form of life insurance is Credit Life or Mortgage Protection, that is sold together with a loan or mortgage, and that pays the loan if you die before you clear it. This can be expensive, and you might find that a term life policy, purchased for the term of your mortgage or loan, will be less expensive than a Credit Life policy.
Whole Life Insurance Policies
Whole Life insurance offers you insurance for all your life, with a premium based upon the age at which you purchase the policy. Although the risk to your insurance company increases as you age, they offset this by charging you more in the early years of your policy, and less in the later years than for term insurance. The premium payments are based upon life expectancy statistics and current investment income forecasts.
A Whole Life policy accrues a cash value the longer you stay alive, which is based upon your premium payment and the interest it has accrued. You can cash the policy in for a cash sum or an annuity after a certain period of time, although this is not the major objective of a Whole Life policy, and the cash value is often way below the sum of the premium payments you have made.
Universal Life Insurance Policies
If you want a better investment pay-out from your policy, certain form of whole life policies have been designed to achieve this. This is the popular Endowment or Universal Life Policy, where you pay the policy not for your whole life, but over a specific term such as 10 or 20 years. Such policies cost more in premiums, since the insurer is expected to pay out more than for a Whole Life policy. It is a combination of life insurance and longer term investment.
American insurance companies that offer all of these options to you include American General, ING and Lincoln National. Each of these is in the top 10 list of life insurance companies. However if you check out the offers made by each of them you will find little overall differences, although some might specialize in certain forms of life insurance.
Hence, you might find that you get a better Universal Life Insurance Policy deal from one company and a lower premium for your Term Life Policy from another. Life insurance companies can specialize, so if you have a specific life insurance need, then check out a range of insurers and opt for that which is best for the type of policy you need.
For information about what jobs are dangerous and you need life insurance for, check my other posts.