What Are the Different Types of Life Insurance Plans?
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Published: 08.08.2024
Group vs. Individual Life Insurance Plans
There are two common ways to obtain life insurance coverage. The first is through an employer-sponsored plan, and the other is by purchasing an individual policy.
✔ Group Life Insurance is coverage typically provided through an employer—however, some churches, professional associations, unions, alumni groups and other large-scale entities also offer these policies.
When provided through an employer group, group life insurance is usually offered free as part of a benefits package alongside of health insurance, dental, vision and other ancillary products. Coverage is typically capped at one to two times an employee’s salary, and therefore, may leave many people without enough coverage.
To bridge this gap in coverage, many employers also choose to offer Voluntary/Supplemental Life Insurance options as a benefits add-on for employees looking to supplement their company-sponsored plan.
In many cases, employer-sponsored coverage is contingent upon your employment—so once you are no longer employed, your coverage does not continue with you.
That’s where individual life insurance comes in.
✔ Individual Life Insurance is a private policy that an individual purchases on their own through a life insurance carrier. Individual coverage is a great way to supplement a group plan or provide coverage if it is not offered through an individual’s employer.
Term Life Insurance
Term life insurance is temporary (i.e., it only provides coverage during a specific “term” or period of time).
Policies typically range from 10, 15, 20, 25 or 30 years—and most people purchase coverage for a period long enough to cover them while they are in their prime working years and as a way to provide income replacement to beneficiaries in the event of their death.
Term life insurance is considered one of the cheapest options, but it does not build cash value and the death benefit is fixed.
Whole Life Insurance
As long as premiums are paid, whole life insurance lasts your entire life. Premiums are more expensive than term life, but the premiums stay the same throughout the course of the policy.
The death benefit is fixed, but these plans also build cash value, which can be accessed while you’re still alive.
Universal Life Insurance
Similar to whole life, universal life insurance is a type of permanent life insurance. One main difference though is that universal life insurance provides the flexibility to adjust premium payments and the death benefit as coverage needs change. It also includes a cash value amount, however, the rate of return is not guaranteed.
Other Types of Life Insurance
There are many other categories and subtypes of life insurance solutions out there, each providing unique benefits and catering to a variety of needs. Some examples include:
Final Expense or Burial Life Insurance
Mortgage Life Insurance
Accidental Death and Dismemberment Insurance
Child Life Insurance
Joint Survivorship Life Insurance
Life insurance can be highly customizable—that is why it is so important to fully understand you and your beneficiaries’ needs and all of the options available before deciding on a best-fit plan.
How can you select the best life insurance plan?
Things to understand before choosing the best life insurance solution.
Cost: What can you afford? Do you need to cut back on other expenses to secure a life insurance policy to meet your needs?
Cash value: Is it important to you to build savings on your policy and have a readily available source of funds in the event you need to withdraw or borrow from it?
Length of coverage: Do you need coverage only for a temporary amount of time? For example, you may only want coverage while you are paying off a large debt such as a mortgage or loans. On the other hand, you may want a permanent policy to protect your beneficiaries for years after your death.
Adjustability: Would you like the flexibility to be able to change premiums and the death benefit on your plan?
Portability when leaving an employer-group: Will your plan follow you once you switch jobs or retire? If not, you may not have enough coverage for your needs and may need to seek out an individual policy.
Medical history: Premiums may be affected by medical history and preexisting conditions. For people with or without serious conditions, what are the best life insurance policies? Do all policies require a medical exam?
How does the Savoy Life Insurance Team help brokers and their clients?
There is an overwhelming number of life insurance options out there. From understanding group plans vs. individual policies to navigating the specifics of different carrier plans and unique offerings—it can be overwhelming for even the most seasoned insurance brokers to provide life insurance solutions to their clients.
That’s where we come in.
Savoy has been providing brokers with general agency and consulting services for over 39 years. We help brokers and their clients:
Identify Life Insurance Needs
Conduct a Policy Review
Obtain Competitive Quotes
Secure Policies from A+ Rated Carriers
👋🏼 Let’s get started. To learn more about Savoy’s life insurance general agency capabilities, contact our team today!
