From the establishment of the first life insurance company in the United States in 1759 to the fierce competition among more than 800 companies, it is a mature and developed market. After several generations of development, American insurance products are currently the market with the most complete product categories. Specifically, there are the following categories:
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| What are the types of American life insurance? |
01
Term life insurance
As the name suggests, this type of insurance only covers a certain period of time, such as 10 years, 15 years, 20 years, and 30 years. This type of insurance is temporary insurance, which mainly provides death compensation for the insured. If the insured person dies during the insurance period, he can obtain the corresponding compensation. Once the insurance period expires, the term life insurance will be useless.
Advantages: cheap premiums
Disadvantages: This insurance premium is non-refundable, and the premium paid will not generate other benefits. The biggest disadvantage is that when the term expires and the insurer is older, it will be very expensive to buy other insurances.
Suitable for the crowd: people who need short-term protection and a relatively limited budget.
02
Whole life insurance
Sometimes called permanent life (permanent life). This type of insurance has a tax deferral function. As time goes by, the cash value in the insurance will increase. Insurance companies will regularly distribute dividends based on the company's profitability, but the payment and amount of dividends are not guaranteed. Over time, the cash value in the insurance will increase. If the insured wants to cancel the insurance in advance, he will only get back a part of the cash value.
Advantages: Lifetime guarantee, guaranteed part of cash value.
Disadvantages: The premium is expensive, and its premium may be 6 to 8 times that of term life insurance. In addition, lack of transparency is the biggest problem of this type of product.
03
Universal life insurance (UL for short)
This kind of insurance is more flexible. The owner of the policy can pay at any time, the cost can be more or less, but the minimum payment level must be achieved . It also has a cash value, that is, fees and profits paid minus insurance fees and charges. This type of insurance can guarantee claims, but the cash value cannot be guaranteed.
04
Investment in universal insurance (variable universal life insurance)
This type of insurance provides death benefit and cash value, but the amount varies according to the results of investing in stocks and bond funds. These funds are managed by life insurance companies themselves, and policyholders can choose the type of investment. Due to investment risks, the cash value may increase or decrease . If the cash account loses too much in the financial market, then the policyholder may need to add more cash to maintain the effectiveness of the insurance. The requirements for the client/broker’s own investment level are relatively high.
05
Indexed Universal Life (IUL)
It is a variant of universal insurance, which can be linked to the three major global indexes-the US S&P 500, Hong Kong Hang Seng Index, and Germany 30DAX Index. Investment income is linked to the trend of these indexes, and the cash value is guaranteed, even if the index falls. The cash value can also get a gain of about 2%. The data shows that the average annualized return of the US stock market in the past 20 years has been 7.5%, and in most years it has a return of about 8% to 10%. Relatively speaking, this level of return is better than the 3% to 4% return of only investing in bond market-type savings and dividend insurance products. In addition to the same function of avoiding income tax and inheritance tax, customers can also borrow money from the cash value at any time, up to 90% of the cash value, almost zero interest rate and no tax is also required.
It is important to note that there is no absolute good or bad in the type of insurance. Each plan has its own strengths, and customers need to decide which insurance product they need based on their own situation and needs. It’s important to note that when buying insurance in the United States, American law stipulates that people cannot buy insurance directly from an insurance company.
They must go through an insurance broker or an intermediary. The commission they charge from insurance companies is also a percentage of the law, regardless of the channel. The plan and premium are the same. Insurance awareness is the awareness that everyone should have, because accidents are always unexpected. The insurance industry in the United States is highly regulated. In the worst case, even if the insurance company you bought the insurance goes bankrupt, the state government of your state will pay compensation. Buying insurance is a way to be responsible to yourself and your family. You may as well regard insurance as a necessity.
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