What Type of Life Insurance is Right for You?

Category: Personal Insurance

Most people would agree that it’s a good idea to have life insurance, especially those with families. In fact, according to recent surveys, more than half of those who don’t have life insurance wish they did and nearly as many with life insurance wish they had more. The difficult part is not deciding if you should have a life insurance policy, but what type you should buy.

Life insurance falls into two camps, permanent and term, and there are several kinds of each. Permanent life insurance policies include:

Whole-life: This type of life insurance combines life coverage with an investment fund. The policy pays a stated, fixed amount on your death, and part of your premium goes toward building cash value from investments made by the insurance company. Cash value builds tax-deferred each year that you keep the policy, and you can borrow against the cash accumulation fund without being taxed. The amount you pay usually doesn’t change throughout the life of the policy.

Universal life: This type of life insurance combines term insurance with a money market-type investment that pays a market rate of return. To get a higher return, these policies generally don’t guarantee a certain rate.

Variable life and variable universal life have an investment fund tied to a stock or bond mutual-fund investment. Returns are not guaranteed.

The other type of coverage is term insurance, which has no investment component. You’re buying life coverage that lasts for a set period of time provided you pay the monthly premium. Annual-renewable term is purchased year-by-year, although you don’t have to requalify by showing evidence of good health each year. Premiums for annual-renewable term insurance are dirt cheap when you are young, and can be as low as a few hundred dollars per year for $250,000 worth of coverage. As you get older, premiums steadily increase. Level-premium term has somewhat higher, but fixed, premiums for longer periods, anywhere from five to 30 years.

The type and amount of life insurance you need depends on your financial goals and what you wish to leave behind. Our agents can help identify those goals and assist you in finding a number of quotes from a variety of insurance providers in order to achieve them. Contact us to find out how you can obtain a life insurance policy that meets your needs and budget.

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