Types of Life Insurance: Which Is Right for You?

You might be surprised to learn that there are many different types of life insurance. Finding the one that's right for you depends on your needs, your budget, and your future financial goals. To help you make the right choice for your family, let's take a look at some of the most common policy types. Afterward, I'll be happy to help you choose the type that's right for you and your family.

Types of Life Insurance

Let’s start with the basics - there are two types of life insurance you need to know about. This is the first choice you’ll need to make when you’re ready to buy life insurance. To decide, you’ll need to answer the question: how long do I want to be covered?

• Term life insurance. As you can tell by the name, this type of policy covers you for a specific term of time. Those terms range from 5-40 years, so there are plenty of choices for you. Term life insurance rates are the lowest you’ll find among any policy type. If you’re on a budget, start here to get the most affordable premium payments. One of the most popular choices? A long term 30-year term life insurance policy. It’s long enough to cover big financial obligations like a mortgage or raising a child until they’re out of the house and on their own.
• Permanent life insurance. There’s another giveaway in the name here! As you probably guessed, permanent coverage does not expire, like term coverage. It lasts until you pass away, which means your loved ones are guaranteed a payout as long as you keep that policy active. Permanent life insurance rates are a bit higher than term rates – expect at least a 20% price jump, with higher coverage amounts costing more. The good news? You don’t have to worry about what happens if you outlive your term. Your first step? Get a permanent life insurance quote here on this website.

Now that you know the two main types of life insurance, let’s go into a little more detail about the different types of permanent coverage.

Benefits of Permanent Life Insurance

Other than lifelong coverage, what benefits can permanent coverage offer? There are quite a few. If you’ve ever heard people talk about permanent life insurance as an investment, this is what they’re talking about.

• Cash value. A portion of every monthly payment goes into your policy’s cash value account. That money grows over time at a rate that depends on your policy type. The growth of cash value over time can really add up, especially over decades. After a number of years go by, you can use it for anything you want. Think of it as a form of savings that complements your coverage.
• Different options to grow your cash value. Depending on the type of coverage you buy, your cash value will grow at either a flat, set interest rate, a varying interest rate, or based on investments you make with your cash value. The right permanent policy for you will depend on whether you want safe, steady growth or the chance for higher growth with some risk.
• Ability to withdraw from or borrow against cash value. That cash value is all yours – in many cases, it’s a “use it or lose it” situation. Sometimes the insurance company will let you pass that cash value on to your beneficiaries, but not all of them. So plan on using your cash value to create supplemental retirement income, or check a few items off your bucket list. There are multiple ways to access your cash value, including withdrawals and low-interest loans from your insurer.

Want a little help figuring out what’s right for you and your family? Give me a call! I’m happy to help.

Types of Permanent Life Insurance

Okay, so you know you want coverage that lasts your entire life. After all, what happens if your term expires in 30 years and you live for 31 more years? A permanent policy solves that problem. But which type of permanent life insurance should you buy?

Here’s a quick rundown of what’s available:

• Whole Life. This is the most basic type of permanent coverage. Your cash value grows at a low, fixed rate of interest. It doesn’t have the bells and whistles of, say, indexed universal life (we’ll go over that one below), but it’s simple and easy to understand. Some whole life policies are small, under $50,000 of coverage, intended to cover your final expenses. You may hear these referred to as burial insurance or final expense insurance. Another type is participating whole life, which pays you a dividend so you can share in a portion of the insurance company’s profits.
• Universal Life. This type of coverage is all about flexibility. You can change the amount of your payments and their due dates, and even change the amount of coverage you have over time. Most clients decrease their amount of coverage as their kids grow up, the mortgage gets paid off, and they have fewer financial obligations in life. Universal life is a good option if you have variable or seasonal income and need that flexibility when paying premiums.
• Indexed Universal Life. An indexed universal life insurance policy lets you grow your cash value component based on the performance of a market index. For example, if you pick the S&P 500, your cash value will grow more when that index rises and grow less if that index tumbles. None of your cash value is actually invested in the market. The insurance company is just using that market’s performance as an indicator of how much interest to credit your cash value account. One of the main benefits of indexed universal life
• Shared Dollar Life Insurance. This type of policy lets two generations pay for the same policy – it’s a way of chipping in together to make sure coverage is affordable. Shared dollar life insurance benefits include teaching responsibility to a younger generation by asking them to help with the payments for the death benefit they’ll receive one day. A shared dollar life insurance policy is also a great way to get a conversation about end-of-life issues started so parents and kids are all on the same page about what the parents want to happen as they age and eventually pass away.

Want more information about these policy types? Need a little help figuring out the difference between whole life and universal life? Call me and let me help!

Which Type of Life Insurance Is Right for You?

It all depends on your needs, budget, and financial goals. That’s why it can be helpful to talk to an agent – it’s our job to ask the right questions to help you make a good decision. For example:

• Do you want (or are you able) to take a free medical exam? If you do, your policy will almost always cost less. If you don’t, I can help you find a non-med policy.
• Do you need help deciding between term and permanent policies? Getting customized advice is just one benefit of working with an agent. You might not know what you don’t know until you talk to someone. I work with many life insurance companies, and have access to all of the policy types described above.
• Do you need help picking coverage amounts? I can help you do a needs analysis so you know exactly what you should aim for, depending on your financial liabilities and assets.

The different types of life insurance products can be confusing – that’s why I’m here to help. You don’t have go through this alone.

Ready to get started? Try getting a quote – and then contact me for help, if you need it.