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Step 5 of 7: Hassle-Free Insurance Shopping

Step 5: The Basic Types of Insurance

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Your first choice is to decide between term and permanent life insurance.

There are two basic types of life insurance and a few common variations.

Term life insurance

Term life insurance is the least expensive and simplest form of life insurance. It covers you for a specific term period (usually 5-30 years). During that time, the rate you pay is guaranteed to stay the same.

Variation of term life:

Return of premium or ROP is an option for term life insurance. It is more expensive than regular term life and is designed to return all premiums when your term period expires. This type of policy can even act as a guaranteed investment account in certain situations.

Permanent life insurance

Permanent life insurance most commonly covers you until you reach age 100 (or sometimes 120). Every permanent life insurance policy also contains an interest-bearing cash value account.

Types of permanent life:

  • Whole life is the simplest form of permanent life insurance (and the most expensive). Similar to term life insurance, what you pay for whole life is
    guaranteed to stay the same. Because of this, the size of your death benefit and the rate of growth in your cash value account are also guaranteed.
  • Universal life is a flexible form of permanent life insurance. Premium payment amount, duration, and timing are adjustable. Because of this, the
    death benefit may change according to your payments and/or interest earned.

Variations of permanent life:

  • No Lapse Guarantee (NLG) is the most common and inexpensive form of universal life sold today. It is often called “lifetime term” because premiums
    are on a set payment schedule to age 100 (or 120) and little or no cash value accrues.
  • Indexed universal life (IUL) is a variation of universal life in which your policy’s cash value is tied to a market index like the S&P 500.
  • Variable life is a variation of whole or universal life in which your policy's cash value accrues interest based on where you invest it. You are free throughout the life of your policy to move the cash value among your investment options.

Different types of insurance fit different life circumstances. Talking with a licensed advisor about your specific needs is the best way to ensure you get the best policy and price for your situation.

Back to Step 4: Issues to Discuss with Your Agent & Why
Continue to Step 6: How Much Coverage Is Needed—And Who Should Have It

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*Comparison of each carrier’s best published rates for a
10-year level term policy, 30-year-old non-smoking female


^Represents 10-year level term life insurance rates for 40-year-old female,
in good health, no tobacco, residing in Ohio.

R. Jan Pinney CLU, ChFC is a licensed life insurance agent in all states and the District of Columbia. The following agent license numbers are provided for R. Jan Pinney as required by state law: CA agent #0440057, LA agent #291116, MA agent #1674866, MN agent #20270113, UT agent #58330, agent R. Jan Pinney, DBA Pinney Insurance Services. Commercial use by others is prohibited by law. This site provides term quotes. Each rate is a quote based on information provided by the carrier. No portion of Trusted Quote may be copied, published, faxed, mailed or distributed in any manner for any purpose without prior written authorization of the owner.

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