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- Up to $8 million in coverage
- Term life policies from 10 to 30 years
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Each of the 13 different life insurance policies is tailored to help with different needs in your life, from paying off major expenses like a mortgage or investing to build wealth for loved ones. See the key features and pros and cons for each policy to help you find the right option.
|Feature||Term life||Whole life||Universal life||Variable life||Variable universal|
|Coverage for a set period of time|
|Guaranteed death benefit|
|Flexible death benefits and coverage amounts|
|Builds cash value|
|Cash value linked to investments|
|Fixed interest rate|
|Variable interest rate|
|Tax-free withdrawals and loans|
Term life insurance offers coverage for a set period of time and comes in varying term lengths. It offers a one-time death benefit paid to beneficiaries if you die during that term.
You choose the coverage amount and term length like 10 or 20 years, and then you pay a set premium during your term. If you outlive the term, you may renew or surrender the policy.
Term life insurance is the most affordable type of policy, and the best choice for most people who have temporary needs to cover — like a mortgage, student loan debt or college tuition.
Whole life insurance offers fixed premiums, lifelong coverage and cash value accumulation. It also has the potential to earn dividends, if you’re with a mutual life insurance company.
As you pay your premium, part of your money is invested with a fixed interest rate from your insurer. Once you’ve built enough cash, you can take out loans from your policy, but the death benefit lowers by your loan amount.
If you have lifelong financial responsibilities or will use your policy for estate planning, a whole life policy might suit you. But it can cost six to ten times more than term life insurance.
CEO & Founder of Choice Mutual
Choosing between term and whole life depends on why you want life insurance. It’s critical to ask the question: “What is the money going to be used for?” There are many types of life insurance, and they all work differently. For that reason, it’s important to select the policy that’s best suited to achieve the planned objective.
For example, if you want to cover a temporary liability, such as a mortgage or other debt or income replacement, term insurance is by far the best type. However, if you have a permanent objective, such as final expenses or estate planning, a permanent policy is a better fit.
In short, if your need is temporary, go term. If your need is permanent, buy whole life.
Like whole life insurance, universal life offers lifelong coverage and cash value accumulation with a unique feature: flexible premiums.
This policy offers similar features to whole life like its cash growth and lifelong coverage. But you can adjust how much you pay as your finances change, and you can use the cash value to pay your premiums.
Universal life insurance requires a more hands-on approach than whole life since the return on investments can fluctuate. It works best for seasoned investors with a high risk tolerance.
Variable life insurance is a type of permanent policy that offers policyholders the opportunity to place their accumulated cash value into a number of smaller investment accounts.
You can choose between a number of subaccounts to invest the cash value of your policy. The insurance company manages these accounts, and you can use the cash value to cover premiums later.
Variable policies suit experienced investors comfortable with extra risk. If the investments do well, your cash growth can cover premiums, but poor returns could lower or wipe out your death benefit.
Variable universal life insurance is a form of permanent life insurance that offers flexible premiums and the investment of accumulated cash value.
Variable universal life lets you invest while keeping your policy’s savings and death benefit separate. But the cash value may get lowered by negative growth, and you can pay higher premiums to rebuild cash value.
Variable universal life insurance offers high earnings potential, but your premiums may rise if your investments don’t do well. Consider it if you’re an experienced investor comfortable with risky investments.
Variable universal life insurance guide
Simplified life insurance is a no-medical-exam policy that offers both term and permanent policies for coverage at a higher premium.
Applicants answer a medical questionnaire instead of undergoing a medical exam, but approval isn’t guaranteed. Premiums tend to be expensive and coverage is limited.
If you need coverage right now or want to avoid taking a medical exam, simplified issue life insurance is a good choice. But premiums are expensive and policies often don’t offer much room for customization.
Joint life insurance is a single policy that covers two people, available as either a permanent or term policy.
With first-to-die joint life insurance, the surviving spouse gets the death benefit when the first spouse dies. In a second-to-die policy, the benefit gets paid after both spouses die, often used for charitable donations.
Joint life insurance is well-suited to healthy couples wanting to simplify coverage with a single policy. If one spouse has a pre-existing health condition or complex medical history, the couple may want separate policies.
Group life insurance is a form of term life insurance coverage provided by an employer at little to no cost for employees.
Employers buy group p0licies under a master contract and either can enroll employees automatically or let them opt in. The employer may cover the premium entirely or deduct it from an employee’s earnings.
A group policy can help you get coverage at little to no cost, but the coverage may not cover all your financial needs. You might supplement your employer’s insurance with an individual policy to ensure long-term coverage.
Credit life insurance pays off your outstanding debts when you pass away, with the value of the policy going directly to your creditors.
This policy may be offered when you take out a home or car loan or line of credit, but the death benefit goes to your creditors. The value of the policy also dwindles over time as your loan balance decreases.
Credit life insurance is marketed as protection from loved ones inheriting your debt. But a term or whole life policy can pay for the same debts and more, and your coverage won’t decrease over time.
Accidental death and dismemberment (AD&D), is a limited form of life insurance that covers you in the event of an accident.
Should you be involved in a fatal accident, this policy will pay out to its designated beneficiaries. If you’re injured and lose a body part or the ability to see, hear, or speak, the policy will pay out a portion of the full benefit.
This policy type offers comprehensive coverage as a standalone policy. You also can buy it as a rider to your standard life insurance policy if you simply want a little extra financial protection.
Supplemental life insurance is a form of additional insurance you can purchase to bump up existing coverage through an employer.
You can opt to purchase supplemental insurance by having premiums deducted from your paycheck. There’s typically no medical exam but if you leave your job or retire, you’ll likely lose your coverage.
Consider supplemental insurance if you have low coverage through your employer and plan to stay with your company for several years.
Also called burial insurance, final expense life insurance covers end-of-life medical bills and funeral costs, typically topping out at $20,000. However, your beneficiaries can use the payout however they want.
Final expense insurance often doesn’t require a medical exam. Instead, applicants are asked to answer a medical questionnaire. The policy is active as long as you pay the premium.
A final expense policy works best for seniors without much in savings who don’t want to burden loved ones with end-of-life costs. If you have other life insurance, you should have plenty for final expenses.
Mortgage life insurance pays off the remainder of your mortgage after you die.
After purchasing a home, your lender may offer you mortgage life insurance. Approval rates are high but premiums are expensive and policies are non-transferable, so you’ll lose your coverage if you move.
A simple term life policy is the more flexible option. But if you can’t get coverage due to a preexisting medical condition, mortgage life insurance is an alternative.
Compare top-rated life insurers by coverage limits and term lengths, then get a quote from your top picks to find your best option.
The best life insurance policy for you comes down to your individual needs and reasons for getting coverage, including factors like:
These are some of the terms you might come across when you’re researching life insurance policies:
Underwriting is how your insurer determines your risk level – and how much you pay for coverage. These three types of underwriting could affect you:
The best type of life insurance policy for you is the one that suits your financial situation, whether your needs are temporary or permanent with cash value built through low- to high-risk investments.
Once you’ve picked a policy type, compare life insurance companies to ensure you’re getting a good deal.
Plus, 2 you can’t.
A new change to the tax code quietly went into effect on January 1, lowering the minimum interest rate for permanent life insurance policies.
A permanent life insurance policy’s cash value can be used as a retirement income supplement, though using it reduces your policy’s death benefit.
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Licensed in five states, Flueckiger holds one of the premier professional designations in the insurance industry.
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