What is The Best Life Insurance For Me?
October 14, 2020
When it comes to your finances, having choices is a good thing. In the world of life insurance, the number of terms, options, and choices can be a little overwhelming!
If you’re married and have a family, life insurance is a must-have element in your estate planning. However, with so many choices, how can you best determine the type of coverage that is right for you?
Let’s look at the different types of life insurance to help you make the best choice to meet your needs.
A Quick Primer on Life Insurance Types
When it comes to life insurance, there are two main types – term and permanent. All other types of life insurance are variations of these two.
Term Life Insurance
Term life insurance offers affordable protection for your family. When you purchase a term life policy, an insurance company agrees to pay a set amount of money to your family should you die during the term.
You agree to pay a fixed monthly premium for the duration of the term. Term insurance is an affordable option if you are young, in good health and have a family. When the term is up, “return-of-premium” plans will return your paid premiums to you tax-free. Some build cash value over the term and allow you to take loans out against the policy.
There are many different options when it comes to term life insurance, including:
• Term Life
• Level-term Life
• Non-level Term Life
Term Insurance is a good choice if you have immediate needs, for example, you have a family and a mortgage. In the event of your death, you can protect your income, or ensure that your partner can pay the mortgage with a term policy.
Term insurance is simple, straightforward and inexpensive. It covers you when you need it the most and you have the ability to choose the length of coverage. Most companies offer up to 30-year terms.
Permanent Life Insurance
Permanent life insurance is a more expensive option. It’s a more complex form of insurance because it comes with cash value and functions. Functions include savings or investment account that grows as you pay your premiums. Permanent insurance is in force until the holder dies.
There are basically three common types of permanent insurance – universal, whole, and indexed. Unlike term insurance, whole life allows you to pay off to your heirs upon your death.
Another reason to choose permanent life insurance is the tax-free savings opportunities. If you’ve exhausted your other tax-free investment options like IRAs, 401Ks, or Pension Plans, a permanent life insurance policy is another opportunity for tax-free savings. Each month a portion of your premium goes toward the cash value of your policy. This is typically put into a low-interest savings account or stock fund investment account.
If you’re looking for a fixed premium, have maxed-out your tax-free investment opportunities and wish to leave an inheritance to your heirs, a whole life policy might be a good choice.
There are three common types of permanent life insurance, they are:
• Whole Life – If you’re looking for a policy that offers fixed premiums, a built-in savings plan and want to leave an inheritance, a whole life policy might be a good option.
• Universal Life– If you think you may have to change your coverage or payments, a universal policy is an option. With universal life insurance, you can decide how you would like to receive your premium. You can decide between funding the death benefit and how much is in your cash-value account.
• Indexed Universal Life– If you’re interested in flexible investment options, an indexed universal life policy is a good choice. This type of policy offers one or more investment options and is typically tied to an index like the S&P 500. This type of policy allows you to benefit from market gains to grow your cash value.
So Which Type of Life Insurance is Right For You?
The short answer is, it depends on your situation. If you’re a young head-of-household and you want protection for your family in the event of your death, a term life policy is an inexpensive way to do so.
If you can afford the higher premiums, are looking for a tax-free investment opportunity, or want permanent coverage to leave an inheritance, a whole life policy might be a better choice. This type of policy allows you to invest and grow your cash-value account and will pay your heirs upon your death.
The best solution is to speak with a qualified professional insurance salesperson to understand all of your options in both term and permanent life insurance. They will look at your situation and lifestyle, and help you to determine which type of life insurance will best meet your needs now and into the future. Connect with carriers that match your needs using FindQualityInsurance.com.