Types of Life Insurance Products

by Jeff Rose on September 28, 2017 · 0 comments

Types of Life Insurance ProductsWhen it comes to life insurance options, there are many. Life insurance is a more flexible product than most people think.

On the market today, there is a variety of insurance policy designs which match up to very different needs. All types of life insurance have the same basic setup; you pay monthly premiums, and, if you die, your heirs receive a death benefit.

However, they are quite different in terms of how long they last, how much they cost, and whether they provide other benefits on top of the death benefit.

Here is a complete comparison of the costs of the the costs of the main types of life insurance so you can choose the best fit for your situation.

It’s vital you understand all of the life insurance options you can choose from. In this article, we are going to give a basic description of each kind of life insurance plan.

Life insurance is one of the best purchases that you will ever make for the future of your family. It’s one of the only ways that you can guarantee that your family has the money that they need, even if something tragic were to happen to you. When you’re looking to get life insurance coverage, it can be a confusing process. There are several types of plans and hundreds of companies that you can choose from. Because life insurance is such an important purchase, it’s vital that you make the best decision for you and your loved ones.

Term Life Insurance

Term life insurance is temporary, budget friendly life insurance coverage. When you buy a term policy, it will have a set expiration date sometime in the future.

For example, it is common to see policies lasting 5, 10, or 20 years, or even longer. If you die during this time, your heirs receive the policy death benefit. If you outlive your policy’s term, the contract expires and you lose your insurance coverage.

One of the best features of a term life insurance plan is that your premiums will remain at the same rate during the period of coverage.  This will make your budget planning a lot more simple.  Most term life insurance providers will give you an opportunity to renew or upgrade your insurance plan toward the end of your current term of coverage.

If your health is good, you may even want to have your term life insurance medically underwritten.  This would give you even more budget friendly premiums.

Term policies are typically the least expensive type of life insurance. Since most policies expire without paying a death benefit, life insurance companies can sell these at a low price. Term insurance also only offers a death benefit; these policies don’t come with any living benefits like cash value.

Since term coverage eventually expires, these policies are best for short-term needs which won’t last your entire life. For example, a good use of term insurance would be to cover a mortgage. Eventually, you’ll pay off your home so you wouldn’t need insurance anymore.

While you may not like the idea of only have life insurance for a certain length of time, these plans are a great option for the majority of applicants. If you’re looking for the most affordable life insurance policy to meet your needs, term life insurance plans are a great place to start your search.

Return of Premium Life Insurance

There is term life insurance which will return your premiums if you are still around to collect them at the end of the specified term of coverage.  This is known as Return of Premium Term Life Insurance.

This is one of the popular life insurance options for obvious reasons.  Except for factors like fees, riders and the like, you will receive a refund of your premium payments at the end of the policy term.

You were responsible enough to make sure that your financial obligations were covered in case of your death, yet if you are still alive at the end of the term, you can take those funds and use them for a new or upgraded policy.  You may need to use some of those funds for another purpose and reinvest some of them in a new life insurance policy.  It is up to you.

Note: to receive the full return of premium, you will need to keep the policy in force for the full term of the policy. Ex. You buy a a 30 year term return of premium life insurance policy, you’ll need to pay on it for 30 years to get the full premium back. If you stop paying on it sooner, you’ll only get a pro-rated portion of it back.

Whole Life Insurance

As you can guess from the name, whole life insurance is designed to last your entire life. These policies do not have a set expiration date. As long as you pay your monthly insurance premium on time, you’ll keep your coverage.

These policies also commonly offer something called cash value. This is money that builds up in your policy that you can withdraw and spend while you are alive. It’s kind of like combining an investment account with your life insurance. Your monthly insurance payments build up a pool of money that the insurance company will invest and pay interest on. Whole life insurance policies offer a guaranteed rate of return so they are a very safe investment.

These plans are a great option for anyone that doesn’t want to worry about having to reapply for life insurance in the future. There are a lot of applicants that don’t like the idea of losing coverage, and these whole life plans are an excellent option for those applicants.

The downside of whole life insurance is that it is very expensive compared to term insurance. For the same amount of coverage, a whole life policy costs ten times or more per month than a term policy.

Universal Life Insurance

Universal life insurance is a mix between term and whole life insurance.

With universal life, you get to choose how much money you want to pay per month for your coverage. Part of the money will go towards paying for your life insurance, basically a term policy, and the rest of the money builds cash value.

The insurance company pays monthly interest to grow the cash value.

Unlike whole life, universal policies pay a variable interest rate. This means that the interest rate can change over time and isn’t guaranteed. Some years a universal policy will earn more than a whole life policy, and some years it won’t

The idea behind universal life insurance is you overpay for your insurance when you are younger to build up a cash reserve. When you get older and insurance for seniors becomes more expensive, the cash value will make up the difference for the extra costs.

Done right, a universal life policy gives permanent insurance coverage for less money than a whole life policy.

However, you need to be careful with these policies. If you don’t pay enough at the beginning, you might run out of cash value and won’t be able to afford payments later on, causing your coverage to lapse.

Guaranteed Universal Life Insurance

You can buy something called a guaranteed rider on universal life insurance. With guaranteed universal life insurance, the insurance company guarantees your coverage, provided you make at least a minimum monthly payment.

If insurance costs go up too quickly or your cash value doesn’t grow as much as expected, it won’t matter for you. You can guarantee your policy to a certain age or for your entire life. The longer the guarantee you want though, the more your policy will cost.

Variable Life Insurance

One last type of life insurance is variable life insurance. This is another type of permanent policy that builds up cash value.

The unique feature of variable life is that these policies let you invest your cash value yourself like a regular brokerage account. You’ll be able to choose between a variety of stocks, bonds, mutual funds, and money market funds for your account savings.

If your investments do well, a variable policy can earn more cash value than other types of life insurance.

However, if your investments don’t do well, your cash value won’t grow by much; you take on the investment risk with these plans.

Calculating Your Life Insurance Needs

Aside from determining which kind of plan is best, the next biggest decision is calculating how much coverage your family will need if something tragic were to happen to you.

Not having enough life insurance is one of the worst mistakes that you could ever make for your family. There are several key categories that you need to account for to ensure that they will have the money that they need.

The first number that you should crunch is your debts and other final expenses. The primary goal of your life insurance plan is to give your family the money that they need to pay off any bills or other debts that they are responsible for.

Before you apply for life insurance coverage, add up your mortgage, student loans, business loans, or any other bills that they would be responsible for. Once you’ve added all of those numbers, make sure that your life insurance plan is large enough to cover those bills.

The next number that you should look at is your annual income.

The secondary goal of life insurance is to give your family the money that they need to replace your paycheck if you were to pass away. If you’re one of the main income earners in your home, then your loved ones would struggle financially if something tragic were to happen.

Your life insurance policy will give your family members the money that they need to get through the tragic time without having to worry about any basic expenses or necessary bills.

Deciding Which Option Is Best For You

Because there are so many different options, it can be confusing trying to decide which kind of plan is going to work best for you and your loved ones. Each of them has different advantages and disadvantages that you should weigh based on your own needs.

We know that it can be confusing determining which one you should buy, but that’s why we are here.

It’s our mission to ensure that you get the best plan possible.

Our agents can walk you through the process and help you make the decision on which kind of plan to buy. Not only can we help you make that decision, but we can also connect you with the most affordable policy on the market.

Unlike traditional insurance agents, we are a group of independent insurance brokers, which means we work with dozens and dozens of highly rated companies across the nation and we can bring all of the best plans directly to you.

Every insurance company is different, and all of them have different medical underwriting and rating systems that they will use. You can get drastically differing rates depending on which company that you get the quote from.

Because there are hundreds of companies on the market, you could spend days calling agents, or you can let our agents do all of the work for you. Fill out our quote form, and we will bring personalized insurance quotes directly to you.

Go with a policy that will cover your needs, yet not empty your bank account.  Make sure to explore your options when it comes to life insurance coverage.  Do not let yourself get short changed, but make sure to put the best coverage for your life insurance concerns in your budget.

How Much Life Insurance Do You need to Buy?

Regardless of which type of life insurance plan that you decide to buy, it’s important that you purchase enough life insurance protection. Not having enough coverage is going to leave your family with additional bills and expenses that they wouldn’t have the money to cover. There are several key categories that you will need to add up when you’re shopping for insurance coverage.

The first number that you should look at is your debts and final expenses. The main reason that you should purchase life insurance is to give your family the money that they will need to pay off any bills that you leave behind. Make sure that your life insurance is large enough to pay your mortgage loan, student loans, and anything else.

The next number that you should look at is your annual salary. The secondary purpose of your life insurance coverage is to give your family the money that they need to replace your paycheck if you were to pass away. It’s important that they have the money that they need to pay for any basic expenses without having to sacrifice their standard of living.

Getting The Perfect Life Insurance Policy

As you can see, there are several different kinds of life insurance plans that you’ll need to choose from. Each of them have different advantages and disadvantages that you’ll need to consider when looking to get life insurance protection for your family. Everyone is different, which means there is no “one plan fits all” policy that you can purchase.

We know that it can be a long and confusing process to get the right plan, but our agents can help connect you with the perfect plan to protect your family. Our agents can help you decide which plans is going to meet your needs, and we also can help you compare dozens of companies all at once.

We are independent insurance agents, which means that we don’t only work with one single company. Instead, we represent dozens of highly rated companies across the nation.

Every insurance company is different, which means they will all have different ways of calculating insurance premiums, which means that you could get drastically different quotes depending on which company that you choose. Instead of wasting your time on the phone with dozens of companies, let us do all of the hard work for you.

We know that it can be a long and confusing process to get the right plan, but our agents can help connect you with the perfect plan to protect your family. Our agents can help you decide which plans is going to meet your needs, and we also can help you compare dozens of companies all at once. We are independent insurance agents, which means that we don’t only work with one single company. Instead, we represent dozens of highly rated companies across the nation. Every insurance company is different, which means they will all have different ways of calculating insurance premiums, which means that you could get drastically different quotes depending on which company that you choose. Instead of wasting your time on the phone with dozens of companies, let us do all of the hard work for you.

If you have any more questions or want to learn more about these different products, feel free to contact us. Our staff representatives are experts in the different types of life insurance. Call now for a free consultation and to get life insurance quotes.

You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get the life insurance protection that your family deserves. Contact one of our agents today and we would be happy to connect you with the perfect policy to meet your life insurance needs. If you were to pass away without life insurance protection, your family could be left with a massive amount of debt.

If you have any questions about life insurance or about the various options available, please contact one of our agents today. We love to answer any questions that you may have. We know that nobody wants to think about his or her death, but that’s why we are here ot help.

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