Insurance Services of Washington Blog
When purchasing life insurance, you may be intimidated by the numerous terms that you will hear. Knowing there are many types and options its easy to get lost. In this article, let's try to simplify life insurance as best as we can. Take note that the different insurance carriers and agencies will have their own offerings, but here is a generalized view of what is commonly offered.
Term Life Insurance or Permanent Life Insurance
You can basically split life insurance into 2 types. The main difference between the 2 is the length of your policy, and the ability to earn cash value.
Term Life Insurance
This lasts within a certain number of years which will depend on the policy you purchase. It can range from 5 to 30 years. If you die within the insurance period, then your beneficiaries will receive a payout. However, if you outlast your term, you will not have any payout. You have the option to purchase another term if this happens. The good thing about term life insurance is that it is simple and easy to understand. This type of life insurance is also the most affordable.
Permanent Life Insurance
This insurance lasts your lifetime. You are ensured a payout when you pass on. As an added benefit, the long term nature of this insurance enables you to earn cash value. Depending on the policy you have, this cash value can be used even while you are living.
Permanent Life insurance can be subdivided into different types. Each with a unique structure. Here are some examples.
Whole Life Insurance
This type lasts your whole lifetime. As long as you keep your payments on time, you have a standard return on your cash value and your death benefit remains the same.
Guaranteed Universal Life Insurance
It is cheaper than whole life insurance. Your death benefit is also guaranteed and lasts a lifetime. However, there is no cash value accumulation and missing payments can mean forfeiture.
Indexed Universal Life Insurance
Your policy's cash value is indexed against a stock market index. This means, your gains will be computed against a formula based on this.
Variable Universal Life Insurance
With this option, your cash value is tied to investment accounts. These can be in the form of bonds or the money market. You have the opportunity to have a large gain if invested well, however you will need to be hands on in managing your policy.
It is very crucial to understand what each type of policy brings to you. Match the benefits of each to what you are looking for in your coverage. Talk to your agent on what is important to you.
At Insurance Services of Washington Inc., our agents work hard in making sure that our clients are well-protected with policies that they can afford. To learn more about how we can help you, please contact our agency at (425) 868-1123 or Click Here to request a free quote.