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Navigating through all the different types of life insurance can seem daunting. At Aflac, we want to help simplify your search and guide you toward finding the life insurance policy that best fits your lifestyle.
Depending on your coverage goals, your family size, your income, and financial aspirations, there may be one type of life insurance more suited for your specific needs than others. Let’s dive deeper into how life insurance works, the types of policies available, and how you can choose life insurance that’s best for you and your loved ones.
How Does Life Insurance Work?
Life insurance is a policy that provides a death benefit payout to beneficiaries if you pass away while it’s active. While there are various life insurance options, these plans tend to function similarly. Whether you have life insurance that lasts your entire life or just 20 years, you must pay regular premiums in order to receive your benefits.
Depending on the type of life insurance policy, there may be other benefits available. Some life insurance plans offer benefits that can be used while the policyholder is still alive. These benefits may come in the form of a cash value component that can be used to help cover medical expenses or everyday costs of living.1
Types of Life Insurance Policies
Each life insurance plan is distinct, so it’s crucial to understand the different life insurance policies so you can find the best option for you and your family. Here are some common types of life insurance:
Whole Life Insurance
Like its name suggests, whole life insurance is a permanent coverage type that lasts your entire life. The benefit will be paid to your beneficiary whenever you pass. This may be a more expensive option upfront, but the benefits can be more secure in the long run.
Whole life insurance may be the best type of coverage if you are looking for guaranteed support for your loved ones on any timeline. It may also be a wise move if you are hoping to factor in long-term financial planning.
Term Life Insurance
Term life insurance is a temporary type of policy that provides coverage for a set term or specific amount of time. At Aflac, we offer multiple term lengths in 10, 20, and 30-year increments. This plan may be a more affordable route. However, the policyholder must pass during the designated time frame of the plan for the beneficiary to receive benefits.
There are additional term life insurance considerations to make as well. In some cases, you may be able to extend the length of your term life insurance policy if you outlive the time frame (subject to limitations and exclusions). This depends on your history of payments and the established guidelines of the insurance carrier. Many customers typically compare the costs and values between term and whole life insurance.
Universal Life Insurance
Universal life insurance works a bit differently than both term and whole life insurance. It’s a type of permanent policy that has an investment portion. This portion, otherwise known as the cash value, can grow throughout the life of the policyholder. The growth takes place in a tax-deferred account at a stable rate.
This type of life insurance plan also allows for greater flexibility, as you may be able to adjust the premium payments and benefit value over time.1
Final expense insurance
Final expense insurance is a type of permanent life policy that offers a smaller death benefit payout. Beneficiaries can use this payout to cover a funeral, burial costs, medical bills, and other end-of-life expenses after you pass away. Aflac offers final expense insurance with fixed and reasonable premiums.
Group Life Insurance
As a business owner, it’s important to make sure your employees feel safe and seen. Group life insurance is a great type of policy if you are looking to provide benefits for your employees or members of an organization. Aflac gives you the opportunity to offer your hard workers term or whole group life insurance options.
Which Life Insurance Policy Type is Best for Me?
The right type of life insurance policy for depends on important factors such as how much you are looking to spend on premium payments, how much coverage would you like to secure for your family, and the access to cash benefits.
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How to choose the best type of life insurance
Even after learning the differences between each type of plan, it can be confusing to pick the life insurance policy that best meets your needs. Talking to an agent always helps, but there are also a few key factors that can help you narrow down your decision.
Choose a Plan Type
If budgeting is your biggest concern, term life insurance may be the best choice. If you have many dependents, whole life insurance may be a better route. However, if financial planning and cash value are most important to you, universal life insurance may be a strong option. Lastly, if you are a business owner, group life insurance might be the best life insurance option.
Figure Out How Much Insurance You Need
Assessing how many dependents you have can help clarify how much life insurance coverage you need. You can reflect on what figure feels right and talk to an agent about how to work this into your plan. The coverage options vary depending on what’s offered in each different type of life insurance plan.
Compare Plan Features and Extra Benefits
Some life insurance options have extra benefits that may make your plan worthwhile. For example, some insurance carriers offer long-term care riders that can be added to life insurance plans. These types of riders allow policyholders to access a portion of the policy’s death benefit every month to pay for long-term care costs.2
We recommend you determine which additional elements are non-negotiable for your needs. If cash value is a top priority for you, your life insurance options may start to slim down. Reading the fine print and understanding the benefits within each plan can help tip the scale too.
Compare Quotes
Lastly, getting some numbers in front of you always helps paint a clearer picture. You can request a quote from Aflac and try our life insurance calculator to start planning for the future now.
Aflac Offers Various Types of Life Insurance
At Aflac, we offer whole and term life insurance policies that are flexible to help meet you and your family’s needs. Our plans are portable, so you can take them with you if you move or change jobs. Now that you understand each type of life insurance, you can make an informed decision about your family’s future and choose the life insurance coverage that is best for your loved ones.
Other types of life insurance
Here are some other types of life insurance policies you may consider:
- Variable life insurance: This type of permanent life insurance has cash value that is tied to investment accounts. The cash value can rise and fall based on how those investments perform.
- Credit life insurance: Credit life insurance is a policy designed to help loved ones pay off large debts, such as a mortgage or car loan, if you pass away before you fully repay them.
- Simplified issue life insurance: This type of life insurance plan involves taking a health questionnaire instead of a medical exam to get approved. This can allow a potential policyholder to get coverage more quickly.
Types of Life Insurance Features
Life insurance can be a complex financial product, so it’s important to understand the features it offers:
Death Benefit
The death benefit is the primary feature of life insurance and is the lump sum payment made by the insurer to the designated beneficiary upon the death of the insured. The amount of coverage chosen by the policyholder is generally determined by their financial needs and the premiums they pay for the policy.
Premium
Life insurance policies come with premiums, which are the payments made to maintain coverage. Premiums can vary depending on factors like the type of policy, age and health of the policyholder, and the death benefit amount.
Cash Value
The cash value is a feature that typically comes with permanent life insurance policies. This savings or investment component allows the policyholder to accumulate funds over time. These funds can then be accessed through loans or withdrawals.
Beneficiaries
Life insurance policyholders name one or more individuals as their beneficiaries, who will receive the death benefit upon the insured’s passing. Examples of beneficiaries include a partner, children, other family members, charities, and other organizations.
Riders
In some cases, you can add riders to a life insurance policy to increase the death benefit or provide additional coverage. For example, an accidental death benefit rider provides additional coverage if you pass away due to a covered accident.
How to Get a Life Insurance Policy
Take these steps to get the right life insurance policy for your needs:
- Compare companies and policies: The first step in getting a life insurance policy is to research different companies and policies. It’s important to compare the features, such as death benefit amount, cash value accumulation options, premiums paid, and riders offered by each type of policy. Additionally, it may be beneficial to speak with a qualified insurance agent who can advise which policy type is best for you.
- Apply and take the medical exam: Once you have found a policy that meets your needs, you can fill out an application and take a medical exam. This is to ensure that the insurance company understands any pre-existing conditions or risks associated with your lifestyle.
- Receive coverage: After completing all the necessary paperwork, you can get the type of life insurance policy you need. The policy will include a death benefit amount, premiums, and other features depending on your individual requirements.
- Adjust your policy as needed: Once the life insurance policy is in place, it’s important to review it periodically to ensure that it meets your needs and remains up to date with any changes in your lifestyle or health. For instance, if you're starting a family, you may want to increase the death benefit amount.
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Disclaimer
1 Investopedia. Life Insurance: What It Is, How It Works, and How To Buy a Policy. Updated September 21, 2023 Accessed February 16, 2024. https://www.investopedia.com/terms/l/lifeinsurance.asp
2 Investopedia. Long-Term Care Rider: What it is, How it Works. Updated September 6, 2022. Accessed February 16, 2024. https://www.investopedia.com/long-term-care-rider-4802409
Coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York. 68000 series: In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400.65000 series: In Virginia, Policies ICC0965JTO & ICC0965JWO. B61000 series: In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC18B61JWO & ICC18B61JTO. In Delaware, Policies B61JWO, B61JTO. B60000 series: In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Q60000 series: Whole: In Arkansas, Delaware & Oregon, Policy Q60100M. In Idaho Policy Q60100MID. In Oklahoma, Policy Q60100MOK. In Texas, Policy Q60100MTX.Q60000 series: Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Oregon, Texas, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C.
Final Expense insurance coverage is underwritten by Tier One Insurance Company. The life insurance policy described herein contains an optional Accelerated Death Benefits Rider that is intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code. Aflac does not give legal or tax advice. Please consult with a qualified legal, tax, and accounting advisor before engaging in any transaction. In AR, AZ, ID, OK, OR, PA, TX and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22. Tier One Insurance Company is part of the Aflac family of insurers. In California, Tier One Insurance Company does business as Tier One Life Insurance Company (Tier One NAIC 92908).
This is a brief product overview only. Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions. For complete details, including availability and costs, please contact your local Aflac agent. Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac does not offer Universal or Variable Universal life insurance.
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