Hello readers! It’s still Life Insurance Awareness Month! In last week’s post we went over the importance of life insurance (pretty much everyone needs it!) and how to calculate how much you need. This week I want to help you understand the types of life insurance and how you can go about buying it!
There are two main types of life insurance, those are Term Life and Permanent Life insurance:
Term Life: This type of policy gives you coverage for a specific amount of time. This “term” is most commonly 20 years, but it can be anywhere from 1 to 30+ years. It is designed for temporary circumstances when the need for coverage will disappear over time, like your kid’s college. Sometimes term plans can be converted into permanent plans. Typically term plans come with the greatest amount of coverage with low initial premiums.
Permanent Life: This type of policy is lifelong, and doesn’t expire after a certain amount of time. You can also accumulate cash-value. It does have significantly higher premiums than a term policy with the same coverage amount. Within permanent life there are 4 categories:
Whole: The simplest and most common, your premiums remain the same for life while your death benefit and rate of return on cash value are guaranteed.
Variable life: With this type you can potentially earn better returns by allocating your premiums into investment accounts, like stocks and bonds.
Universal life: The amount of your premiums payments can vary while still guaranteeing a minimum death amount as long as your premiums continue to sustain it, if they don’t your death benefit would be reduced.
Variable universal life: A mixture of the previous two options, your premium payments can vary while you have the option to earn better returns with the investments.
You can try out this calculator to help you decide what plan might be right for you, then I recommend speaking with your financial adivsor or insurance representative to discuss any other potential factors unique to your situation. https://lifehappens.org/product-selector/
How to get life insurance:
Okay, great, hopefully by now I’ve convinced you that life insurance is important! And hopefully you want to take that next step and get a policy to protect your loved ones when you are gone! Here are 3 ways you can go about purchasing a policy:
Through an insurance professional: Ask for recommendations from others on someone they trust, then meet with at least two potential professionals, for comparison's sake.
At work: Many employers offer group life insurance at no cost to the employee. Sometimes the coverage amount is not enough but they may give you the option to purchase additional coverage. Sometimes employer based plans can be less expensive and most often can be easily deducted from your paycheck for convenience. Talk to your benefits department at work to see what’s available.
Direct purchasing: You can purchase coverage via the internet, phone, or by mail directly. This option could require more research and comparisons on your part to make sure you’re finding the best deal.
Well, I hope this post has been helpful! Thanks for reading :)