Which Type of Life Insurance Policy Is Right for Me?

Life insurance policy

No one wants to talk about it, but we have to because it is essential. You need a life insurance policy. When you are gone, your loved ones will be grieving and mourning. They will feel sad and cry. That is unavoidable.

However, leaving them penniless and hopeless is avoidable. You need to ensure their financial future is secure. Even though you are gone, your kids will attend college and that debt you might leave behind will be paid.

In a nutshell, the people who depend on your income shouldn’t suffer when your income is no longer available to them.  That is the crucial part that life insurance plays in your family’s long-term financial plan.

Unfortunately, with the wide range of choices available in the market, it can be quite challenging to choose a life insurance policy that is right for you. In this post, we discuss some of the common types of life insurance policies and when you should consider each of them.

Term Life Insurance

Term life insurance is the simplest and most affordable type of life insurance you can purchase. The primary reason why it is affordable is that it only does one thing; pays your designated beneficiaries a fixed amount of money if you die during the term.

While some people believe that a term policy is unreliable, it is still a proactive way of taking care of your loved ones should the unexpected happen at the most inopportune time.

You can think of a term life insurance like your auto insurance. Every six months, you need to write a check to the insurance company. They will deposit the check, and if your vehicle is involved in an accident within the insured period, the company pays you. But if you are not involved in an accident within that period, you don’t expect a refund on your premiums.

With term life insurance, you are paying an insurance company to assume the financial risk of your death should it happen during your policy’s term. The typical terms are 10, 15, 20, or 30 years long.

Life insurance policy

So, if you purchase a 20-year term life policy with $1000, 000 in coverage, you will make an agreed-upon monthly payment for 20 years. If you die before the 20 years lapse, the insurance company will write your designated beneficiary a check worth $1000, 000 known as the death benefit.

A term life policy is good for individuals who have higher coverage needs that may reduce over time. Maybe you have a relatively younger family that is still growing, and you need to find a way of securing their financial future. At such a time, your coverage needs maybe high.

However, they may lower significantly when some of them complete college and become independent.  You will always have an option to renew your term policy or shift to a permanent option at the end of each term.

Whole Life Insurance Policy

Whole life insurance policy is a more permanent life insurance option designed to provide you with coverage for the rest of your life. As long as you pay your monthly premiums, the policy will cover you to the last day.

A whole life policy also allows you to lock in your monthly premium rate, which means it won’t increase even as you age or when your health status changes. For instance, if you purchase a whole life insurance policy when you are still young and vibrant, you will still pay the same rate even when you become old and weak.

Typically, purchasing a whole life insurance policy early is cheaper than waiting to buy it later in life. But in general, whole life insurance policies are more expensive than term life policies due to their “permanency” and “cash value.

In this case, cash value refers to a small fraction of your monthly premium that is set aside each time you pay. The money is accessible, and you can either leave it to grow or use it to borrow a loan.

A whole life insurance policy is a good option for anyone who needs guaranteed protection for the rest of their lives at a consistent rate that they can budget for every month. Just keep in mind that the sooner you purchase your whole life policy, the better.

Universal Life Insurance

Just like the whole life policy, a universal life insurance policy has a cash value and a death benefit. The only difference between the two is that universal life policies offer variable/adjustable monthly premiums. Technically, it means you are at liberty to access some of your cash value and adjust your yearly payment.

With a universal policy, you can adjust the coverage amount to meet your current needs even though it is subject to approval by the insurance company. Therefore, if you are after flexibility, this is the right option for you.

This type of policy is also good for young people who are just starting and prefer adjustable rates. Maybe you have just landed your first job or are renting your first house; it provides you with an excellent opportunity to secure lifetime coverage at affordable rates that fluctuate based on your coverage needs.

Guaranteed Issue Whole Life Insurance

Life insurance isn’t just for healthy young people at the peak of their lives. Guaranteed issue whole life policy is specially designed for individuals who want to obtain life insurance without completing a medical examination.

As long as you are between 50 and 85 years old, you cannot be turned down even if you have underlying health complications. This policy allows you to find the right coverage without stress and hassle.  Just like whole life policies, guaranteed issue whole life insurance offers a constant monthly rate that won’t change even as you age or if your health status changes.

This policy is a good option for individuals who meet the age requirements but cannot be approved for the other types of life insurance policies due to their health status. Therefore, if you have underlying health issues, but you still want to ensure your loved ones won’t suffer after you die; this is the right option for you.

Insurance Master Is Here to Help You!

Whether you are in the market for a new life insurance policy or just wondering if you are carrying the right policy, our experienced insurance agents can help you. We shall take time and walk you through the process of securing a life insurance policy that suits your family needs and fits your budget. Contact us today to get started!

Leave a Comment