Potential life insurance buyers have a variety of options when it comes to purchasing an affordable and effective policy
Deciding which life insurance policy best fits you and your family’s needs can be a challenging process. There are a ton of options, and it can be difficult to determine what your financial and medical needs will be 10, 20, or 30 years from now. Despite the challenges of selecting a good life insurance policy for your family, doing so will not only protect you financially– it can give you peace of mind for years to come.
Term life insurance vs. whole life insurance policies
When it comes to buying life insurance, most, if not all, of your options can be put into two categories: term life insurance policies and whole life insurance policies, which are sometimes referred to as permanent life insurance policies. Term is considered the simplest form of life insurance and, in most cases, it’s significantly less expensive than whole life policies. If you purchase a term life insurance policy, your benefactors will only receive funds if you die during the duration of the policy. The moment your policy expires it becomes, in effect, worthless.
Level term vs. decreasing term policies
The two main types of term life insurance policies include level term and decreasing term. Both policies vary in duration, usually between one and thirty years. In level term policies, the death benefit remains the same throughout the life of the policy, whereas, in decreasing term policies the death benefit decreases (usually in one-year increments) throughout the entire life of the policy.
Traditional whole life, universal life, and variable life insurance are the three major options for permanent life insurance buyers
Traditional whole life, universal life, and variable insurance life are the three major kinds of whole life or permanent life insurance policies. Unlike term policies, permanent insurance pays a death benefit to your benefactors, no matter how long you live– if you keep paying your premium. Permanent life insurance policies usually consist of two elements; a savings and investment portion and an insurance portion. This increases the cost of permanent insurance premiums when compared to term options, but also gives the owner of the policy more value and long-term financial options, such as borrowing against the policy in times of financial need.
Traditional whole life policies
Whole life insurance may be best for individuals who want a policy as an investment that will accrue cash value over time. The premiums and payouts of this policy are fixed, and can be quite expensive, so it’s often a good idea to buy a policy when you are relatively young to potentially provide for a surviving spouse or children. Whole life policies usually invest the savings portion of your policy in high yield savings account, which can later be borrowed against.
Universal life policies
In comparison to whole life insurance policies, universal life insurance allows for more flexibility in the various elements of their policies. For example, policy owners can increase or decrease their death benefit over time, per their changing financial and family needs. Additionally, after submitting your first premium payment, you can pay your premiums at any time and at any amount (subject to some limits). Those that want to increase their coverage benefit can do so at any time, but often need to pass a medical exam first.
Variable life insurance policies
Variable life insurance is simply another kind of life insurance, somewhat like whole life, but with a greater and more aggressive investment component. Unlike whole life policies, which usually invest the savings portion of your policy in high yield savings account, variable life policies invest your cash-value account into a sub-account similar to a mutual fund, which may be able to gain higher returns over time. Much like other forms of permanent life insurance, this account can usually only be accessed indirectly while the policy is in effect (i.e. borrowing against it).
Deciding which life insurance policy to choose can be tough, but you don’t have to do it alone. If you’re uncertain about which kind of policy can best help your family weather financial uncertainty, consult with an insurance expert to find the right policy for you.
To learn more about different kinds of insurance and how they might help you and your family better reach your goals, contact Avante Insurance today for a free consultation.