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Understanding the Different Types of Life Insurance

Life insurance comes in many different types and plans, including term, mortgage, whole life, universal life, index universal, and final expenses life insurance. 

Preview the types below to better understand what options are available, but know that our team can help you choose the right policy for your unique needs!

Term Life Insurance

Term life insurance is the cheapest type and the easiest to understand. Term life insurance provides a predetermined death benefit and covers you for a predetermined number of years, usually five to 30 years. The annual premiums are fixed and are based on your health and life expectancy at the time you apply for the policy. 

Mortgage Protection Life Insurance

Mortgage protection is another type of term insurance but it is focused on covering and protecting your family’s home. A house is often the most important and expensive purchase of your family’s life. Mortgage protection ensures that if anything happens to the covered person, their family will not be left in a bad financial position and the debt of mortgage and home will be covered. 

Whole Life Insurance

Whole life insurance is a form of permanent life insurance. It is life insurance that stays in effect until the person reaches age 100. Whole life insurance is like term insurance, but it also has a cash value or bank account. The cash value is defined as the money or premium you pay every month which builds and will equal the amount you choose as death benefit by the time you reach age 100.

Universal Life Insurance

Universal life insurance, like whole life insurance, is a form of permeant life insurance. That means it is a type of life insurance that provides a death benefit and a cash value where the funds can grow tax-deferred. It also earns a determined interest rate that builds, which is an added incentive over whole life insurance. 

Universal life policies provide the flexibility to pay more or fewer premiums in certain guidelines. Those premiums are usually less expensive than normal whole life insurance policies.

Index Universal Life

Index universal life (IUL) policies are universal life policies that can build cash value quickly. They can be used as a tax-free retirement fund to supplement your 401k or social security. They can also be written for a newborn, building over time to pay for college tuition, a down payment on a first house, or retirement. IULs are considered one of the safest positive interest money building accounts available and can be tailored to individual needs and budgets. 

An IUL policy allows the owner to allocate cash value amounts to either a fixed account or an equity index account. Policies offer a variety of well-known indexes such as the S&P 500 or the Nasdaq 100. IUL policies can be a one size fits all permeant life insurance policy for an individual.

Final Expense Insurance

Final expense insurance is also known as burial insurance. Final expense insurance is used for covering the bills that your loved ones will face after your death. These costs will include medical bills and funeral expenses. These policies are permeant and are usually $30,000 and below in value.

For more information on which type of life insurance best fits your needs, contact the Wooten Agency today.

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