According to the 2024 Insurance Barometer Study conducted by LIMRA and Life Happens, 42% of American adults note they need life insurance. The number of people with an uncovered need for life insurance is about 102 million adults. When asked what prevents them from buying a policy, people say that there are no options that are clear or affordable to them.
There are several popular types of life insurance in the US, each with its own peculiarities and suited to different purposes and needs.
Term Life Insurance
This is the simplest and most popular type of life insurance. The policy is valid for a certain period of time (usually 10, 20, or 30 years). If the policyholder dies during this period, the insured amount is paid. If the term expires, the policy either ceases to be valid or can be renewed under new terms.
Pros:
- Premiums are low compared to other types of insurance;
- Good for people who need to cover specific financial obligations (such as a mortgage or children's education costs).
Cons:
- At the end of the term, the policy is no longer in effect and there is no refund of premiums if the insured survives;
- It does not accumulate cash value.
Permanent Life Insurance
Permanent life insurance lasts as long as you live and often includes a cash accumulation component that can be used during your lifetime.
Pros:
- Lifetime coverage;
- Savings component (a kind of "savings account") that can be used as a loan or cashed out.
Cons:
- Premiums are high;
- A slow savings growth.
Universal Life Insurance
This type also offers lifetime coverage but is flexible in premium payments and savings. The customer can change the size of premium or even temporarily suspend it if there are enough savings.
Pros:
- Flexibility in managing premiums and savings;
- Ability to change the amount of coverage over time.
Cons:
- Product complexity;
- Fluctuations in savings value depending on market conditions.
Variable Life Insurance
This type allows savings to be invested in different investment funds, which offers the potential for higher returns but also involves investment risks.
Pros:
- Ability to increase savings through investments;
- Lifetime coverage.
Cons:
- High risks associated with investments;
- It requires active investment management.
Hybrid Life Insurance with Long-Term Care
This is a relatively new type of insurance that combines regular life insurance with protection against long-term care costs (such as disability or infirmity of age). If a person does not need long-term care, the insurance payout will be regular.
Pros:
- Additional coverage against the costs of care;
- Flexibility in using funds.
Cons:
- High premiums;
- Limited coverage for long-term care.
Group Life Insurance
This type of life insurance is provided by employer as part of employee benefit program. It typically covers a base amount (such as the employee's annual income) but can be increased by employee’s extra payments.
Pros:
- Low or no costs for the employee;
- Easy to arrange through the employer.
Cons:
- Limited coverage;
- The policy may expire if you change jobs.
The choice of insurance type depends on many factors, such as age, financial obligations, goals, and available budget.
Source: https://www.investopedia.com/fa-one-thing-life-insurance-87063702
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