How Popular are Different Types of Life Insurance Coverage?

The different types of life insurance sold in the United States include term and permanent or cash value life insurance.  Permanent life insurance includes whole, universal and variable life insurance. The majority of life insurance that is owned in the United States is provided through employer-sponsored group life insurance plans.  These plans provide a benefit that is typically set a minimum level of around $50,000 or based on a multiple of an employee’s income. For many Americans, group life insurance is all the life insurance that they have since it does not require a medical examination to obtain. On an individual basis, term insurance is the most popular type of insurance in terms of popularity, followed by whole life, universal life and variable life.  Variable life insurance, a product that is also classified as a security under federal securities laws, experienced the largest drop in sales in 2009, falling 50 percent in sales in the first 6 months over prior year sales.

Term Life Insurance

Term insurance enjoys the greatest popularity in the world of life insurance coverage. This is due, in part, to the fact that term insurance costs less than other types of life insurance.  The premium costs for a term insurance policy is nearly 1/10th that of permanent insurance such as whole life, universal life and variable life insurance.

Term insurance is known as temporary insurance. It provides protection for a temporary period, usually up to age 65. The premiums for term insurance are fixed and level throughout the period the policy is in force and providing protection. The cost of term insurance, in order of price, begins with decreasing term insurance (used for protecting mortgages), level term insurance and increasing term insurance, which provides for the return of paid premium after the fixed premium period has expired.

Permanent Life Insurance

Permanent insurance is the next type of insurance that is sold on an individual basis that is below term insurance in popularity. The simplest reason for this is that permanent insurance is more expensive than term insurance.

Whole Life Insurance

Whole Life is one of the most expensive forms of permanent life insurance. Whole life provides protection for the whole of life, typically until age 100. At age 100, the insured would receive the death benefit or face amount of the contract, if still alive. Whole life has a cash value that can be accessed by the policy owner during the time the policy is being paid for. This allows the policyholder to have access to an additional asset, whenever needed. Whole life sales remain popular among life insurance buyers. There has been a slight decline in sales for the first 6 months of 2009, the decline was for 3 percent.

Universal Life Insurance

Universal life insurance uses an interest crediting method to create cash value in the policy.  This value may fluctuate based on changes in interest rates, which are guaranteed by the insurance company for a period of 1 year. This fluctuating means that a policy owner with a universal life policy could borrow the available cash value and find themselves in a situation where interest rates are lowered, requiring more money needing to be put into the policy. For the first 6 months of 2009, universal life sales fell 29 percent.

Variable Life Insurance

Variable life insurance, as mentioned above, is classified as a security product. An insurance agent selling this type of life insurance is required to hold a securities license. Because of the near collapse of the financial markets in 2008, variable products have lost a lot of their popularity with insurance consumers.

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