What Types of Life Insurance are Available?

Life insurance is an important part of protecting yourself and your family. You have two basic life insurance choices, plus a range of add-on options that can help you customize your life insurance coverage to fit your needs. Let's take a look at your choices.

Two Types of Life Insurance

The two main types of life insurance you have to choose from are level insurance coverage and decreasing insurance coverage. The biggest difference between these two policies are that one will have a coverage amount that remains level and constant throughout the life of your policy, while the other will have a coverage amount that decreases over the years. This second type will begin with a high coverage amount and will end with a low coverage amount.

There are obvious benefits and drawbacks for each. For example, a level insurance policy will have a higher premium, but will give you the peace of mind of a guaranteed coverage amount. A decreasing insurance policy will have a lower premium, but your family may never see a return on your investment. The policy you choose will depend on your current life circumstances and your family situation.

Life Insurance Add-On Options

There are four common types of add-on options available for your life insurance policy. The first is a critical illness benefit, which allows you to collect a lump-sum amount if you are diagnosed with a listed illness. Critical illnesses include things such as cancer, heart attack and kidney failure.

The next add-on option can protect you in the event of an accident, sickness or unemployment. With this option, you can receive a monthly allotment to pay your mortgage if you are unable to work due to an accident, sickness or unemployment. This benefit is usually restricted to a 12-24 month maximum.

Another option is income protection. This option protects you if you become ill or incapacitated and replaces up to 50 percent of your monthly income after you have exhausted any illness-related benefits given by your employer.

Last is a family income benefit. If you were to die, this option would give your family a monthly allotment for the remainder of the policy, rather than one lump sum paid after your death. The advantage of this is that it allows your family to budget with a specific, guaranteed monthly income, just as they would if you were still alive.

Remember that most add-on options will increase your monthly premium payments.

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What You Should Know