Types of Life Insurance Policies

There are two common types of life insurance policies to provide coverage for your family or business:

Term Life Insurance and Permanent Life Insurance

Term Life Insurance

Term life insurance is a very popular choice for people looking for an easy way to buy a lot of coverage at a great price.

A term life insurance policy offers guaranteed death benefits and level premiums for an initial period such as 10, 15, 20, or even 30 years.

What does term life insurance cost?

You can use our search engine to compare term life insurance polices from many highly rated life insurance companies.

A $500,000 term life insurance policy can be tailored in duration to address your exact future needs.

Your current health, age, and the term duration you choose will have a direct impact on the price you ultimately pay for your policy.

You can save money by matching your insurance needs to a term duration that will protect your family from financial hardship should you die unexpectedly.

We have analyzed term life insurance by age and the needs which are typically covered as you mature.

Here a few examples of term insurance covering a specific need:

Term insurance is great option for young adults that are just getting started with a new family and financial obligations!

An important time period to maintain life insurance coverage is when your children are young and you are in your prime earning years.

If you have a spouse and kids that depend on your salary, then a 20 or 30 year term insurance policy will secure their financial future in the event that something ever happens to you.

Plus, there is not much difference in cost between a 20 and a 30 year term life insurance for young people.

As people get older the need for life insurance typically gets smaller and coverage gets more costly.

This eliminates the need to purchase more expensive permanent polices for many middle aged people.

What is the least expensive life insurance policy to cover short term needs?

A 10 year term life insurance policy may be ideal for someone in their 50’s looking to cheaply protect their income to until they retire.

What if you need coverage for a longer period of time?

A 15 year term can be a happy middle ground between a 10 year and a longer duration 20 year plan.

A 15 year term plan is often perfect for middle aged couples who wanting to cover a $500,000 mortgage balance that has a 15 year amortization schedule.

While, a slightly more expensive 15 year term policy can also be perfect plan for people looking to protect their income to surviving family members.

Disciplined people often invest the money saved not buying permanent coverage for better returns provided by mutual funds.

In time, as your home gets paid off and you savings continue to grow, you may be close to being self-insured by the end of your term.

Term life insurance is a popular choice for seniors looking for a policy to protect their pension income for a surviving spouse.

A longer running 20 year term insurance can help seniors create a “nest egg” for children provided that they do not live longer then your policy.

Since, term life insurance for seniors is not as expensive as permanent coverage the cost savings can also ease the burden on your budget.

Permanent Life Insurance

What if you already know that you will need a $500,000 policy for rest of your life?

If you do need lifetime protection, we normally recommend that coverage be a permanent policy.

There are two primary types of permanent coverage:

Universal life and Whole Life

Universal Life Insurance is a type of permanent policy which offers the opportunity to maintain coverage for your entire lifetime.

The best way to explain universal life insurance is that is similar to term life with an added a cash value component.

So, part of each payment goes towards the cost of insurance for the policy, and the remainder goes into a cash value account inside the policy.

Universal life can be structured at a competitive price point with no cash value with guaranteed coverage to age 120. This inexpensive policy design is often called Hybrid Universal Life.

Universal life insurance can also be designed for cash accumulation that acts similar to a savings account with tax deferred growth along with lifetime coverage. This more expensive policy structure is often called Indexed Universal life.

An indexed universal life insurance policy gives you the opportunity to allocate your cash value to either a fixed account or an equity index account.

Indexed universal life policies usually offer a variety of index’s to select from, such as the Dow Jones, S&P 500, and the NASDAQ.

Whole life is also a form of permanent life insurance coverage. Whole Life provides a fixed premiums and death benefit for the lifetime of the insured.

As long as the required premiums are paid, this type of policy will remain in force for your whole life.

Whole life insurance policies also accumulate guaranteed tax-deferred cash values and non-guaranteed dividends.

These cash values are available upon surrender, or by taking withdrawals or loans against an active policy.

Should you buy a $500,000 whole life policy or is universal life better?

If you need your policy to always be there when die, a universal life is always a much cheaper option compared to the whole life insurance.

Because of it’s guaranteed cash values and dividends, a $500,00 whole life insurance policy will often cost you almost 50% percent more then universal life.

Although whole life has disadvantages, it may still work for people interested in both guaranteed cash accumulation and coverage for life according to White Coat Investor.

However, universal life polices are better for middle aged people who have accumulated enough savings and only need lifetime protection.

Successful people investing in life insurance over the age of 50 want buy coverage at the lowest possible cost.

Many wealthy middle aged folks view permanent life insurance as just another asset class.

They can fund a policy with manageable premium to buy a larger death benefit while their health is still good.

Permanent coverage allows wealthy people in their 60s and 70s the opportunity to leverage current assets to maximize their total net worth.

So, if your goal is to pass tax free money to your children, a universal life policy can be excellent long term investment.

Is a $50o,000 whole life insurance policy a good investment?

This will ultimately depend upon how long you live. An average life span will normally equal a excellent the rate of return while increased longevity decreases the ROI.

If any of this seems confusing, here is a brief summary: