Two major types of life insurance are term and whole life insurance. Whole life aka permanent life insurance encompasses a number of subcategories that might include universal life, conventional whole life, variable life and variable universal life.
Group life insurance products are though different from the life insurance products sold to individuals. Discussed below are the major life insurance products available to individuals.
- Permanent or whole life insurance – Permanent or whole life insurance pays a death benefit in the event of the policyholder’s death, irrespective of how long he/she lives. There are 3 prominent permanent life insurance – conventional or traditional whole life insurance, universal life insurance and variable universal life insurance. Each of them has some variations.
Traditional whole life offers both death benefits and premiums designed to stay the same (level) all through the life of the policy. The cost per 1000 USD of benefit gets increased as the insured person ages. And it certainly gets higher if the insured lives up to 80 years or even more. The insurer may charge a premium that gets raised every year. And this makes it difficult for most people to afford life insurance at later years of their life. And thus the insurance companies keep the premium level by charging a premium amount, which in the early years of life, is higher than what is required to pay the claims, investing that additional money and then using it to compensate the level premium to help paying the cost of Life Insurance Stanford and Los Altos CA for senior people.
According to law, as the ‘overpayments’ reach a particular amount, that should be reimbursed to the insured person in the form of cash value in case the person doesn’t want to continue with his/her original plan. This cash value is just an alternative financial benefit under the actual policy. It’s not an additional benefit.
During 1970s and 1980s, life insurance carriers introduced two more variations to traditional life insurance and those are universal life and variable universal life.
- Term life insurance – This is a type of life insurance simpler than a whole life insurance policy. It pays only in the event of death during the term of the policy that is generally from 1 to 30 years. Most term life policies don’t have any other provision for offering benefits.
There are two major types of term life insurance – 1. Level term and 2. Decreasing term.
Level term insurance denotes that the death benefits would stay the same all through duration of the policy. People usually prefer to get this insurance over decreasing term.
Decreasing term insurance denotes that the amount of death benefits drops, typically in 1-year increments, over the tenure of the policy.
Now it comes to a person’s individual need and budget about which policy he/she should choose. There are insurance companies that even offer custom insurance in Palo Alto & Stanford CA to ease the customers with their hard-earned dollars.