If you're just starting to look into getting a life insurance policy or if you're reviewing your life insurance portfolio, the myriad of choices can be confusing.
Man is Mortal. That makes life insurance a little unique and interesting, doesn't it? We purchase things like health insurance, car insurance and home insurance, then hope we never have a need to use them. Life insurance is different, because it’s a unavoidable fact that sooner or later, each of us will die.
So many choices. When it comes to life insurance, there are many options. What is the best life insurance policy? You may have heard terms like "whole life insurance," "term insurance," "universal life insurance" or "variable insurance." What does it all mean? And what are the differences?
Well, first let me point out what they have in common: all life insurance policies provide payment to a beneficiary in the event of your death. Except for that basic tenet, the differences between policies can be major.
Let's consider the basic differences in the types of life insurance policies:
Whole life insurance. This type of insurance covers your entire life (not just a portion or a "term" of it). It is considered permanent life insurance which is used to cover you for your "whole life." Whole life insurance policies tend to cost more than "term" policies. This is because they grow what is known as "cash value," and because after a time, you will be able to borrow against, or withdraw from, your whole life benefits to supplement your retirement. Most whole life insurance policies have guarantees on both the cash value and death benefits.
Term life insurance. Rather than covering your whole life, "term" insurance covers a pre-determined portion of your life. Common terms are ten, twenty and thirty years. If you die within that term, your beneficiaries receive a death benefit. If not, you typically receive nothing. To put it simply, term life insurance allows you to purchase more coverage for less money. Basically, you are betting on the probability of your death occurring within that specified "term."
Variable life insurance. Variable life insurance is a permanent insurance. However, unlike whole life insurance, variable insurance allows you to invest the cash value of your policy in "subaccounts." These can include money market funds, bonds or stocks. Variable insurance offers a bit of control, as the value and benefit depend upon the performance of the subaccounts you select. However, that means there could be significant risk involved. since the performance of your subaccounts cannot be guaranteed.
Universal life insurance. With universal life insurance, it all comes down to flexibility. This is permanent life insurance that provides access to cash values that build up tax-deferred. You can choose the amount of coverage you feel is appropriate, and you retain the ability to increase or decrease that amount as needs change (subject to minimums and requirements). You also have some flexibility in determining how much of your premium goes towards insurance, and how much is used within the policy’s savings element.
So, which life insurance policy is right for you?
Many factors come into play when deciding what type of life insurance will best suit your needs. The best way to learn what policy is right for you is to give us a call at 630-393-6500. It's very quick and easy, so let us assist you in looking at all the factors and help you to find the right life insurance policy at the right price for your specific needs.