Short guide to the different types of life insurance policies

Insurance policies are very different depending on your needs. You can choose a policy based on the duration of the coverage it gives, on how much premium you have to pay, or, if need so arises, the ability to withdraw money.

Primarily, there are two kinds of life insurance policies available, term life and permanent.

Term life insurance is often uncomplicated, the terms laid out so clear that even a layman can understand what the policy entails without much trouble on their part.

On the other hand, permanent life insurance, also dubbed as whole life insurance has many different varieties of insurance policies, whole life just being one of many. There’s also a component of cash value inherent with permanent life insurance policies This particular cash value increases on time as you continue paying your premiums.

These also enable you to apply for a loan against the insurance policy for college, medical expenses or home buying.

Here are the different types of life insurance:

a.) Term life insurance

b.) Whole life insurance

c.) Guaranteed universal life insurance (GUL)

d.) Indexed universal life insurance (IUL)

e.) Variable universal life insurance (VUL) and variable life insurance (VL)


Term Life Insurance


Pros: Easy to understand and pretty cheap compared to others

Cons: Its only term life insurance, covering only a part of your life. It often happens that the policy holder outlives his policy.

If you need another policy, then depending on your age and health conditions, the cost would be higher.


Whole Life Insurance


Pros: provides coverage for your entire life.

Cons: very expensive of life insurance

It doesn’t expire, unlike term life insurance. You only need to continue paying your premiums on time and the policy would take care of itself.


Guaranteed universal life insurance (GUL)


Pros: Much less expensive than whole life insurance. You can also set a bar on the age on when you want the benefits from the policy, be it 90 or 100, your choice.

Cons: If you miss even a single payment, you could lose the policy and forfeit all the payments made till date. GUL doesn’t have any cash value associated with it and such delays on payments can make you forfeit the policy. If you are someone who misses mortgage payments or bill payments then it’s advisable not to take up GUL.


Indexed universal life insurance (IUL)


Pros: The cash value linked with IUL grows with time. The cash value is invested in the stock market and when the stock market goes up the value of the cash amount increases and vice versa.

Cons: There is often a cap on the gains from the stock market. There is also fees associated with the policy and participation rates which lower your cash value.


Variable universal life insurance (VUL) and variable life insurance (VL)


Pros: With VUL and VL, your cash value is invested by you into stocks. Partial withdrawals on the cash gained is also possible.

Cons: If you aren’t particularly savvy about your investments then you could also lose out money just as easily as you gain it. The market is often volatile and hence your cash value goes up or down depending on the wave.

It has a higher amount of fees and participation rates.


There are also types of life insurance meant for specific situations like—Mortgage life insurance, Credit life insurance, Accidental death and dismemberment (AD&D), Joint life insurance, First-to-die, and Second-to-die.



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