Cover Detail
Whole Life Insurance: This is a permanent form of life insurance that protects your loved ones from financial hardship while accruing cash value toward your retirement savings or as a safety net in case of hardship. Premiums are set at the beginning of the plan and are generally much higher than in the case of term life insurance. This type of life insurance policy creates the strongest form of guaranteed and ongoing protection, albeit at higher premium costs and with an inferior return on investment.
Universal Life Insurance: Universal life insurance is a relatively new type of life insurance that was devised to eliminate some of the common criticisms of whole life insurance—primarily inflexible premiums and poor investment returns. You can buy universal life insurance with a large, one-time premium paid at the beginning of the policy, or you can make variable premium payments within a certain range. Beware, however, that interest rates will affect premiums and investment returns. Indeed, universal life insurance offers greater flexibility but also greater risk. It's also the most complicated life insurance policy, so you should go over the fine print of your policy before making any final decisions.
Term Life Insurance: Term life insurance is the purest form of life insurance in the sense that it serves the sole function of protecting loved ones in the event of your death or serious injury or illness. These life insurance plans have a set term after which the policy expires. The best plans often establish a term length that coincides with a planned retirement age at which point financial protection is no longer needed. Shorter plans may also be purchased, but you should ask for a policy with an automatic renewal clause. Otherwise, if you become sick, you may not be allowed to extend your term life insurance policy because you've become too great a risk. Different term life insurance plans can establish premiums and benefits that are fixed or adjustable.
Accidental Death and Dismemberment: This insurance offers additional coverage in the event of accidental death or certain other serious injuries including loss of limb or paralysis. Many people choose an accidental death and dismemberment insurance policy as a supplemental rider to low-cost life insurance. The suddenness of accidental death can create extra hardships for families and dependents, and these policies may create double indemnity coverage for these circumstances. Some employers offer this coverage as a perk, often for positions that require a great deal of travel.
