Choose The Best Type of Life Insurance for You and Your Family
Life insurance might seem confusing, but it really is a simple concept. You pay a premium to keep your coverage active, and in turn, your life insurance company guarantees to pay out your policy to your beneficiaries when you pass away. It’s a way to provide your loved ones with a sense of financial security when you’re gone, while giving you peace of mind.
That being said, there are a few types of life insurance policies on offer, and the best one for you comes down to your needs and budget.
Term life insurance
Term life insurance is the cheapest and most popular policy. It offers temporary coverage lasting a set amount of time, like 5, 10, 15, 20 or 30 years. This is the “term.”
The premiums are locked in when you purchase the policy, and if you die during the term, your insurer will pay out the death benefit to your beneficiaries. But if you outlive the term, your policy will expire and you’ll need to apply for a new policy if you still need protection.
Permanent life insurance
If you need lifelong coverage or want to treat your life insurance policy as a cash asset, look into permanent life insurance. These policies last your entire life (provided you pay your premiums), and a portion of your premium is invested to give your policy a “cash value.”
When you’ve accumulated enough cash value, you can start taking out loans against your policy to pay for things like college tuition or a home renovation.
These are the most common permanent life insurance policies:
Whole life insurance. This is the most straightforward permanent policy. Your premiums don’t change and the cash value grows at a fixed rate determined by your insurance company.
Universal life insurance. If you want to be able to adjust your premiums and death benefit (i.e. the payout from your policy), universal life insurance could be a good fit. Just keep in mind that your cash value will fluctuate with market conditions.
Variable life insurance. Interested in a hands-on approach to your investments? With variable life insurance, you can choose which investments to funnel your cash value into, making it ideal for seasoned investors.
Final expense insurance
Also known as burial insurance, final expense insurance is designed to cover your end-of-life expenses. This may include the cost of your funeral and burial, as well as unpaid medical bills. Since it has such a specific purpose, final expense policies are typically marketed to people over 50. Coverage is usually capped at low amounts, somewhere between $2,000 to $10,000.
Juvenile life insurance
Often called “child life insurance,” this policy does exactly that: covers the life of a minor. It’s a type of permanent life insurance policy, which means it lasts for the child’s whole life and the premiums stay the same.
Juvenile life insurance is usually purchased by a parent or grandparent, and the coverage is usually limited to low amounts under $50,000. When the minor reaches the “age of majority” — which is 18 in most states — the policyholder can either keep or transfer ownership of the policy to them.
Not sure which life insurance policy best suits your needs? Contact us today to discuss your options.