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How do we classify the two life insurance policies?

It may be difficult when figuring out what kind of life insurance you need the most. You would have to choose from either term or permanent life insurance and then choose the insurance you need from one of those two categories. Each one of them are listed in detail so you’ll know which fits the best for you.

 

TBA

  • TBA option for most people. 

  • Whole, universal, and burial life insurance are all types of permanent life insurance.

  • Some types of permanent life insurance come with a cash value that works like an investment account.

  • Some life insurance policy types are categorized based on their medical underwriting or lack thereof, such as guaranteed issue life insurance.

 

Term life insurance

It is a life insurance where once you pay it, you get around 10-30 years of it. And if you pass away while term life insurance is still in effect, the money goes towards your family and it’ll benefit them. This is a low-cost life insurance you can get where you don’t have to pay extra premiums.

  • Pro: affordability. Term life insurance policies are less expensive than other types of life insurance policies and generally have lower premium costs.

  • Con: length. Term life insurance has an expiration date, which can align with a mortgage or when your children graduate college. Those looking for lifelong coverage should opt for permanent life insurance instead.

  • Who it’s for: most life insurance shoppers. Those looking for cheaper life insurance for up to 30 years should buy term life insurance.

Universal life insurance

This type of life insurance is permanent instead of term. Universal life insurance goes on forever until you either pass away or you don’t have enough to pay for the premiums. The three different universal life insurance policies within this category would be variable, guaranteed, and indexed.”. “Indexed universal life insurance (IUL) is the most popular type of UL…” can be changed to “It is f universal life insurance where your coverage lasts forever and you may have some advantages with death benefits as well.

Indexed universal life insurance

Indexed universal life insurance (IUL) is the most popular type of UL. The cash value account has a minimum (and maximum) guaranteed interest rate based on a stock market index (like the S&P 500), chosen by the insurer.

  • Pro: cash value gains. There’s potential for bigger gains in the cash value account compared to other permanent life insurance policies, depending on stock market performance.

  • Con: investment caps. Most insurers set limits on cash value gains. You won’t lose your base cash value, but dedicated investment accounts offer higher returns.

  • Who it’s for: portfolio enhancers. If you’ve maxed out other investment accounts or are looking for a relatively safe investment with guaranteed minimum values, IUL might be right for you.

Guaranteed universal life insurance

“This is another branch of the universal life insurance category where it provides an inexpensive price for life insurance. It’s another universal life insurance that gives death benefits for the clients. When picking an age, make note that the older the age, the more expensive the premium is going to be.

  • Pro: stability. Guaranteed universal life insurance provides lifelong coverage without the market fluctuations of indexed or variable policies.

  • Con: no cash guarantee. Unlike some permanent life insurance, GUL doesn’t allow for premium payments from the cash value account. If you skip a premium payment, your policy will lapse.

  • Who it’s for: risk-averse people with permanent insurance needs. Guaranteed universal life insurance is a relatively affordable permanent option, sort of like a term life insurance policy where the term lasts the rest of your life.

Variable universal life insurance

This is the last universal life insurance in the universal life insurance category where you are allowed to have cash value be fixed or not. Variable universal life insurance is the most difficult one to buy since it’s the most complicated one to use even if it has great benefits such as good returns on cash value.

  • Pro: cash value gains. There’s a potential to see bigger gains in the cash value account compared to other permanent life insurance policies, depending on your investment choices.

  • Con: too hands-on. The policyholder, not the insurance company, manages the investment portfolio. Unlike other types of permanent insurance, you’ll need to manage your own cash value investments or work with your own financial advisor.

  • Who it’s for: DIY investors. There’s a big potential upside for policyholders who don’t mind being involved in money management.

Variable life insurance

“Variable life insurance is not part of the universal life insurance but it is a part of permanent life insurance. This kind of life insurance is very adjustable with its premiums and cash value without any complications. Buying variable life insurance provides you tax-deferred benefits as well.

  • Pro: savings potential. Similar to variable universal life insurance, policyholders can see greater cash value gains with this type of policy than other permanent products.

  • Con: high risk for policy lapse. Both the cash value and death benefit can fluctuate based on your portfolio’s performance.

  • Who it’s for: hands-on investors who don’t mind risk. For those who want to take control of their own investment portfolio, there’s potential for cash gains.

Burial insurance

If you need life insurance that will be able to provide you finances on funeral services and everything that is related to someone passing away. In order to get this specific life insurance, you would need to explain your demographic to a broker/agent.

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Simplified issue life insurance

As the term says, it’s a simple life insurance where all you need to do to get it is to take a survey regarding your health and well-being. Even though it is less complicated than other life insurances, it’s very short in terms of how long you get this life insurance.

Guaranteed issue life insurance

You may also refer this to the “no questions life insurance” according to Investopedia. This life insurance doesn’t need you to answer health questions nor having the organization or company to look through your records. The only issue with getting this particular life insurance is that the queue will most likely be long since it’s one of the less complicated life insurance there Is.

Frequently asked questions

Term life insurance is one of the components of life insurance where you pay in a specific amount of years in order to cover costs for death and such. On the other hand, permanent life insurance is a life insurance you pay for the rest of your life unless you don’t have enough to pay the premiums anymore. It also covers costs of death and such.

TBA to save or invest. But because cash value policies have more expensive premiums, limited investment options, and offer relatively low rates of return, they’re not a great primary savings vehicle.

What type of life insurance you should buy depends on what your needs and requirements are. If you are considering having life insurance for a lifetime just to get protection forever, then you should probably choose permanent life insurance. If you just need it for a certain amount of time, then term life insurance is a great choice for you.

The reason why term life insurance is very popular to get is because you get to choose how long you want the life insurance to start and end. Another purpose for term life insurance is that it’s cheaper to get since you can choose options where the shorter the year, the cheaper it will be compared to permanent life insurance