Types of life insurance and how they work

What type of life insurance should you buy? This is a common question among many people looking to buy a policy in Houston, TX. The answer is always straightforward–you choose life insurance based on your needs and what you want to gain in the end. We have two major types of life insurance: term and whole life insurance. To help you understand which type best fits your needs, Modern Risk Management will discuss everything about the two types. 

Term Life Insurance

Term life insurance is a simple type of life insurance that provides coverage for a specific length of time, like 10 to 30 years. Term life insurance is simple and most often referred to as ‘pure’ life insurance as it does not have cash value. It is simply designed to pay your beneficiaries a payout if you die during the term.

Most term insurance policies have standard premiums, which means you pay the same amount every month. When the term expires, you either go without insurance or get a new one. However, some companies offer discounts when this happens, so you can renew the older coverage or get a new policy at discounted rates.

Some Houston, TX companies may also request you to convert your term life insurance to a permanent one, which may come at a higher cost. 

Whole Life Insurance

Permanent or whole life insurance pays death benefits when you die. It doesn’t matter how long you live. This type of life insurance comes in three different types; universal life insurance, variable universal life insurance, and traditional whole life insurance.

Whole life insurance has a cash value that grows over time, making it look more like an investment plan. Every month, a specific portion of your premium will go into the policy’s cash value, which often offers a guaranteed rate of return.

Don’t buy life insurance blindly. Learn how each type works and buy what works for you. For more information about life insurance policy types, feel free to contact Modern Risk Management today.