There are two main types of life insurance: term life insurance, and permanent life insurance.
Term life insurance is the most simple, straightforward, and affordable life insurance option. It provides coverage for a set period of time or “term”, typically 10-30 years, and is designed to protect your dependents. If you pass away during the term period, your beneficiaries receive a cash payment to cover expenses, like: funeral costs, daily living expenses, debt repayment, mortgage payments, and college tuition.
Permanent life insurance is complex and more expensive (often five to ten times more expensive) than term life insurance. It provides coverage in a set amount for your entire life, and is sometimes used as an investment vehicle. Some insurers invest your premium payments and the interest earned on those investments goes back into your policy as accrued cash value. Please note: when choosing this type of policy you should be prepared to assume meaningful levels of risk.
Some permanent life insurance policies let you borrow against the accrued cash value (surrender the policy for a cash payment). But if you don’t repay the amount borrowed with interest before you pass away, the amount paid to your beneficiaries will be reduced.
Because we’re focused on protecting vulnerable families, Ethos offers term life insurance, and recommend it particularly if:
- You need coverage to replace your income over a fixed period of time (like when you’re raising children or paying off a mortgage)
- You want the most affordable coverage
- You want a streamlined and straightforward process