The Best Type of Life Insurance
When it comes to choosing a life insurance policy, you will probably wonder which one is best. Like many types of insurance, life coverage has no single solution. Rather, the “best” policy is one geared toward your current and future situation. Consider the following options.
Term Life Insurance
Term life insurance is a fixed policy. Unlike other options, there’s no savings or investment component involved. Rather, the policy is based on a predetermined death benefit, covers you for a specific number of years and has fixed annual premiums related to health and life expectancy. If you’re looking for a payout by a specific date or to make a specific account contribution, term life insurance has its benefits. With the policy, your loved ones receive a payout if you pass away during the duration of the policy. If not, you have the option to renew it for another fixed period.
Permanent Life Insurance
Permanent life insurance covers several types of policies, all combining a death benefit with a savings or investment account, and lasts as long as you’re alive. While it has no fixed duration, premiums can be variable and are typically based on your health and medical history.
Although this seems to be a plus for many, permanent life insurance tends to come with far higher premiums than a term policy, but offers the same amount of coverage. As a bonus and definitive feature, its cash value – in relation to your savings or investments – does accumulate over time. This potentially results in a larger payout and lets you borrow against it in the meantime. Yet, while the premiums do tend to be higher initially, premiums often don’t increase at the same rate as term life insurance. Thus, you can secure the same rate for a longer period.
For those considering permanent life insurance, an agent or carrier will present you with several choices:
- Whole Life Insurance: You receive death benefit protection until you die, fixed premiums, guaranteed cash value accrual and guaranteed protection. You can also borrow against the policy’s cash value. While these look like positive points, they come with higher premiums than most life insurance policies.
- Guaranteed Universal: This lower-priced policy offers a flexible death benefit period to a specified age. As a downside, cash value accumulates at a slower rate and your coverage stops once you reach the specified date.
- Variable Universal: These policies experience more fluctuations, based on the value of the dollar, securities and other financial equity factors. In some cases, it gains little cash value. In others, its ups and downs result in a greater payout by the end.
Convertible Life Insurance
What if your financial or personal needs change throughout the course of your life? This is the case for many people, so you may want to consider convertible life insurance. In these situations, you can convert your term life insurance policy to a permanent one without having to undergo a medical examination or seeing your premiums soar through the roof.
Whether you’re considering life insurance in your 20s or later down the road, work with an agent at Ion Insurance to determine the best policy for you. To start exploring your options, give us a call at 203.729.5261.