Only Buy the Insurance You Need
Take some time to figure out your finances, and be sure to select the best policy that you can afford. You may want to include amounts for funeral costs, income or property taxes, childcare or education. Insurance premiums for term life insurance policies generally start off low, and increase with time. However, purchasing permanent insurance with a higher policy amount will leave you with higher premium payments.
Term Insurance With term life insurance, policies are valid for a certain period of time, and are usually purchased as ten or twenty year terms. Most term policies can be renewed for additional terms, and can be converted to a permanent policy without a medical exam. Term insurance policies do not have a cash value, so if you choose to end the policy, you are not entitled to money back.
Permanent Insurance Permanent, or “cash-value” insurance policies do not have a set term, and are purchased for an indefinite period of time. With this type of policy, money can be taken out of the plan as a loan or if the plan is surrendered. The three types of permanent insurance are whole, universal and variable.
Whole The biggest benefit to a Whole life insurance policy is the guaranteed death benefit and guaranteed cash value. Premiums rates are generally fixed, and can be paid up in a limited number of years. However, the rate of earnings on the money invested in these plans is less than if you would have invested in an alternative savings plan.
Universal Universal permanent insurance policies are similar to term life insurance, except they keep the insurance component separate from the investment component. Instead of your premium going directly towards life insurance, a portion of it goes into a cash value account that will earn you interest.
Variable Variable permanent life insurance policies are very similar to Universal policies. The one main difference is instead of earning interest on the cash value, it gives the policyholder the choice of investing in stocks, bonds and money market funds.
Not all Insurance Policies Require a Medical Exam Even if you are not in the best health, you can still purchase a life insurance policy. If your illness precludes you from purchasing a traditional policy, there are two types of insurance policies that do not require a medical exam.
Simplified Issue Simplified Issue insurance does not require a medical test, but the insured will need to answer health and lifestyle related questions. Coverage under this type of policy is usually limited to $150,000. You will not be eligible for Simplified Issue insurance if you have been declined for other insurance in the past two years.
Guaranteed Issue Guaranteed Issue insurance is issued immediately with no medical, questions, or underwriting. Coverage under this policy is guaranteed even if you have been declined for life insurance in the past two years. The trade offs are that coverage is often limited to $25,000, there are higher premiums to pay, and the pay out may be limited to only a return of investment if the insured dies in the first two years.
Still not sure which type of life insurance is right for you? Lane’s Insurance can help you understand the options so you can make a confident and informed decision.