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Simplifying Various Life Insurance Types

Does thinking about the various life insurance types leave your head spinning?  I hope it makes you feel better to know you’re not the only one like that.  If you’re in the market for life insurance, let us help you. These descriptions of the life insurance types will help you understand them. You may be searching for life insurance for you or life insurance for your parents or maybe you’re interested in reading some of our reviews such as with New York Life before making your final decision. Let us guide you in this process.

Are you concerned because you have certain health conditions that you think will cause you to be declined?  You may be searching for life insurance for diabetics or many other health conditions. Don’t let your fears stop you from getting the coverage you deserve.

If you’ve never shopped for a life insurance policy, the whole process can be frustrating and confusing. Types of Life InsuranceThere is a bunch of jargon that you’ve never heard before and all of the policies eventually start to sound the same. How are you supposed to decide which one is the best for you and your family? Luckily, we are here to help!

Purchasing life insurance is one of the best transactions you’ll ever make, which is why it’s vital that you make the best decisions. You shouldn’t just go with the first policy you’ll find. Not only can that leave your family with too little coverage, but it could leave you paying hundreds or thousands of extra dollars.

To help you out, we are going to outline the most common types of insurance policies. Each of them has its own sets of advantages and disadvantages that you have to weigh based on your family’s needs.

Term Life Insurance

Term Life insurance is more common because it is a lower priced premium product. Coverage is for a specific period of time, or “term”, typically from one to thirty years. When you first purchase a term life insurance policy, you’ll be given a premium amount, which is what you’ll pay for as long as the policy is effective. The shorter the term means a lower premium. When the initial term ends, the insurance company determines your annual renewable rate which typically is higher than the initial rate. To avoid paying the higher renewal rate, consider making the initial term as long as possible.  If you need coverage for a major loan or business purposes, then term life insurance is the life insurance type that will work best for you, given the lower initial premiums.

If you’d like to learn more about term life Insurance, refer to another blog post on different types of life insurance 

Whole Life Insurance

As the name implies, whole life insurance is the type of life insurance that will protect you for your entire life. This life insurance type builds cash value and pays dividends.  Because of these features, premiums for Whole Life Insurance are higher when compared to Term Life Insurance or Universal Life (see below). You can borrow your cash value on this life insurance type. Dividends can be used to either buy additional insurance, or may also be used to reduce your premiums.  Usually my clients prefer the flexibility of Universal Life Insurance, which I describe for you next.

Universal Life Insurance

When I think of this life insurance type, the word that jumps to my mind is “flexibility”.  Both the premiums and the coverage are very flexible when compared to Whole Life Insurance policies, but the concept is the same, life insurance for your whole life.  It’s possible to pay lower premiums when compared to Whole Life Insurance and get the same length of coverage.  The insurance company will decide on the specific investment vehicle, usually mortgages and bonds. Whole Life Insurance is an “old school” life insurance type, while Universal Life Insurance is the more flexible solution. The main advantage of Universal Life is the potential for your CSV (cash surrender Value) to grow quicker than whole life. I have never run into a situation in which whole life insurance was the better type of life insurance than universal life.

Variable Life Insurance

This life insurance type will allow the policyholder to choose specific investment vehicles. The fund used to pay premiums above and beyond the COI (cost of Insurance) are invested in specific securities with a risk for the account value to decrease when the market does not grow. Stock funds can be chosen and the ROI can be used to reduce the premium cost, or put back into the account.  With this type of life insurance the agent needs to be securities licensed like a stock broker. I am not securities licensed and so all I can say is I don’t sell this type of life insurance nor do I suggest mixing insurance with investments.

What To Do Now?

As you can see, each of these policies are all very different. Each of them has attractive features that other types don’t have. It can be overwhelming deciding which one fits your preferences perfectly. It’s vital that you make the best decision for you and your family.

Aside from choosing which type of policy you need, you’ll also have to decide how large of a policy you’re going to purchase. Not having enough life insurance could leave your loved ones with excess debts that put additional stress on them if you were to pass away. If this is your first time purchasing a policy, you’re probably wondering how to know how much life insurance to buy. There are several different questions you can ask yourself to help you calculate your insurance needs.

The first question that you should ask is, “how much debt would I leave to my family?” as I mentioned earlier in the article, all of your unpaid expenses would be left to your loved ones after your passing. Every year we hear countless stories of families that lose a family member unexpectedly, and on top of the emotional suffering, they find themselves under piles and piles of bills that they don’t have money to pay off. This is where a life insurance policy comes in. Before you finalize any type of life insurance policy, make sure that it would cover all of the unpaid expenses that your family would be responsible for, everything from your mortgage to student loans.

The other question that you need to ask is, “how many people rely on my salary?” nobody wants to be reduced to a dollar amount, but that’s what you need to do to protect your family. If you were to pass away, would your family suffer financially from the loss of your income or would they be able to get by with only one income? The other purpose of life insurance is to give your family the funds they need to find a way to replace your income without sacrificing their standard of living.

If you’re looking to purchase a life insurance policy, any of the types above, one of the best ways to ensure that you get a quality and affordable policy is by working with an independent agent. Instead of working with a single company like more insurance agents, independent agents represent dozens of different companies such as quotes from State Farm Life Insurance. You don’t have to worry about being sold an expensive policy or being sold additional coverage that you don’t need. Additionally, working with one of these agents is a great way to compare quotes from multiple companies without having to spend hours on the phone talking to different agents. Your time is valuable, don’t waste it looking for the perfect policy, let our agents at Goldsmith Insurance Agency do all the hard work for you.

If you have any questions about life insurance coverage or any of the types that were mentioned in this article, please feel free to contact us at any time. We are dedicated to ensuring that you make the perfect choice for your life insurance needs.

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