Which Life Insurance Policy is Best for You?
by Thomas Hanes on Jun 17, 2020
The decision to purchase life insurance is one of the most important decisions we make, which is why the decision as to which type of life insurance policy to buy can be just as significant. You can’t really try on a life insurance policy, so the one you take needs to fit you like a glove from the beginning. The difficulty for most people is the number of different types of life insurance products from which to decide. The decision is made more manageable when you have a clear understanding of your own needs, priorities, preferences, and outlook on the future. Working with a qualified life insurance professional you should be able to swiftly narrow down your options.
Match the Policy to Your Needs
The process for choosing a life insurance policy has to start with a thorough and honest evaluation of your financial situation and your protection needs. The blunder that many people make is to assume that the need for life insurance will only last as long as their children are dependent. Nevertheless, the need for financial protection could continue long into the future if there are still debt obligations or if one of the spouses lacks the ability to fully replace the revenue of the other spouse. There may come a point when calculating more coverage or renewing an expired term policy could become excessively costly, especially if you become uninsurable in the future.
All of these factors are important to the decision as to which type of life insurance to purchase and should be examined in the circumstances of your specific situation.
Permanent (Whole Life) Insurance might be best for you if….
You want to add more confidence and security to your protection plan. Though more costly than Term Life, because a portion of your premium goes towards cash value, whole life insurance guarantees your death benefit, your premiums, and your cash value growth. The cash value growth keeps your insurance costs down in the later years, which is how the insurer is able to level your premiums. Eventually, your cash value can be used to pay down premiums or for any purpose you might have while you are living.
Universal Life Insurance might be best for you if…
You believe that your need for life insurance won’t be temporary, but you want a more cost-effective way to keep permanent coverage in place. Universal life offers a lower-cost alternative to Whole Life; however, there are no real guarantees. Because the cash value component is separate from the death benefit component, there is no guarantee that the cash value growth will be sufficient to maintain the target death benefit, so, you may have to increase your premiums to catch it up. Because the policyholder assumes more of the risk, Universal Life insurance is typically less expensive than Whole Life.
Variable Life Insurance might be best for you if….
You understand the nature of risk and reward, and that, if you are going to be paying a premium for permanent life insurance, you might as well have the cash value component working as hard for you as it can. With Variable Life insurance, the cash value component is actually a set of separate accounts that can be invested in various types of stock and bond funds. The potential for higher returns offers the opportunity to pay up your policy more quickly, or have more funds available for retirement.
Term Life might be best for you if….
You know with some level of confidence that your need for life insurance protection will not last beyond a particular duration. Term Life is also a more affordable option for people on tight budgets, and its low cost makes it almost inexcusable for any family not to have this important protection. However, should you conclude that your need for life insurance is likely to continue, or that you won’t be able to accumulate your own capital adequately, it would be important to consider a permanent form of life insurance. In many cases, the ideal choice might be some combination of the two.
Use these life insurance policy tips hints to decide on which policy is the best match for you!
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