What is life insurance, and what are the most common types?

Get informed about life insurance. Learn what it is, the different types available, and other important considerations you'll need to make when getting started with life insurance coverage.


by Vinicius Barbosa

Published on 04/01/2023

Discover the essential knowledge of life insurance

Life insurance can be a good idea! Keep reading to see why. Source: Canva.

Do you know what life insurance is? Are you one of those people who dread the idea of planning your life insurance coverage to ensure your family’s financial security if something were to happen to you? 

Either way, this blog post will provide some essential knowledge about life insurance. What it is, what types there are, and more. 

We’ll also cover a few key considerations. So that regardless if you’re already familiar with life insurance or just getting started learning about it. Making an informed decision can be confidently done.

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Confidently understand what types of life insurance to choose

Do you ever wonder if having life insurance is right for you and your loved ones?

Many people put off researching insurance until it’s too late or until a significant event in their lives forces them to decide about coverage. 

It can be an overwhelming topic to tackle, so we are here to help! Let’s take a look at what is, how it works. And some of the different types available in today’s market. 

After reading this blog post, it will become clearer why securing adequate coverage early on can be one of the most important investments a person can make. Financially and emotionally.

Term life insurance

There is more than one type of life insurance. Source: Canva.

If you’ve considered what type of life insurance is best for you. Know that term insurance can be a great option for many. 

Here’s what you need to know about it. Term life is an affordable way to get the protection your loved ones will need if something happens to you.

However, remember that it’ll only last for a set number of years. 

This means on the flip side, that once your term expires, the policy ends, and so do any premiums paid up until expiration. 

When talking money, remember you also have the choice of receiving death benefits as either a lump sum or an annuity. Which could be more applicable to certain lifestyles. 

All in all, if you’re looking for cheaper coverage over the course of up to 30 years or longer. Then term life insurance may be just what you need!

Whole life insurance

Whole life insurance is one type of life insurance. But what really sets it apart is that you get more than just a death benefit. You also get what’s called a cash value. 

A portion of your premium goes toward maintaining the insurance and the rest of it goes into this special account which earns interest over time. 

You could use the money in various ways, like endowed gifts or estate plans. 

Now here comes the trade-off. Whole insurance typically costs five to 15 times more than term for the same amount of coverage. So what happens if you don’t pay attention and start digging into it? 

Be on guard against fees, taxes and other stipulations that come with all the complexity because who likes nasty surprises?

Universal life insurance 

Universal insurance is the perfect way to have the peace of mind of a life insurance policy while still having the flexibility to adjust premiums and death benefits as necessary. 

It’s great for high earners who may want to save some extra money without entering a higher income tax bracket. 

It’s also ideal for anyone looking to balance their financial security with what their current budget allows. You can decrease or increase how much you pay towards premiums as needed. 

If benefits need to be cut back at any point, then your cash value picks up the slack for you! Ultimately it boils down to what works best for your needs and what kind of investment risk you’re willing to take. 

Variable life insurance 

Keep you and your family protected. Source: Canva.

Variable life insurance is a permanent coverage option that allows you to make the most of what would otherwise be idle cash. 

You get the chance to invest your cash value into the various funds offered by your insurer. Which can include mutual funds. 

The performance of these investments will reflect the broader market trends. So there’s potential for meaningful returns that could easily outpace what traditional whole-life policies can offer. 

However, it being an investment does mean that there is an associated risk. If the funds you picked underperform, you could also end up losing money. 

Ultimately, this makes variable life insurance best suited for high earners looking to add something extra to their permanent coverage portfolio.

Final expense insurance

Final expense insurance, more commonly known as burial, is a type of insurance that helps alleviate the stress that comes with end-of-life expenses. 

Unlike what traditional insurance provides. Funds to replace portions of one’s income.

Funeral insurance offers relatively smaller coverage in the form of a death benefit meant to cover funeral costs and other associated costs such as medical bills or urns. 

The biggest advantage of final expense insurance is its ease of access. And it’s typically what people with certain health conditions or seniors opt for who might not qualify for traditional insurance. 

With this being said, what you pay in premium may be quite high for what you get in return. While traditional life insurance generally offers more coverage at a lower cost.

How does pet insurance work? Here’s everything you need to know

Is a pet insurance policy really worth it? We know the little furballs in our lives are endlessly lovable. But when the dreaded vet bill rolls around, let’s be honest. It can leave your wallet crying for help. 

Pet insurance offers an opportunity to ensure that you won’t be stuck footing an enormous bill on your own if an emergency arises. 

But just how exactly does this mysterious coverage work? In the next post, we’ll explore what pet insurance is and how it works.

So you can make an informed decision about whether or not it’s right for you and your furry family member.

little girl sleeping with her pet

How does pet insurance work?

Worried about what would happen if your pet needed expensive medical treatment? Here's everything you need to know about pet insurance,

About the author

Vinicius Barbosa

Vinicius Barbosa is a writer of finance-related content on this portal. Graduated in Social Communication, he writes about everything that involves the world of finances, from credit card recommendations to investment tips, for readers who want to make better decisions when it comes time to spend their money or invest wisely.

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