Day after day, you work hard to create a safe and enjoyable life for the people you love. Now is the time to protect everything with life insurance. Life insurance policy is pretty simple: It pays a cash benefit to the beneficiary if the insured person dies while the policy is in force. But once you start looking at your options, it can be difficult to know which type of life insurance is best for you. You need a policy that fits your needs and priorities, as well as your budget and financial plan.
To help you make an informed decision, we’ll share facts about three common life insurance options: term life insurance, whole life insurance, and universal life insurance. We hope this guide can help you decide which type of life insurance is best for you and your family.
Term life insurance
Many people buying life insurance for the first time choose term life insurance because it is often the most affordable.
Term life insurance pays a death benefit if the insured person dies during a specified period. The specified period of a term policy can be 15, 20, or 30 years, or up to a specified age. The premium (what you pay each month or quarter for your policy) remains flat, meaning it stays the same for the entire period you choose.
When the term of your life insurance ends, so does your policy. However, many term policies will allow you to continue your coverage with higher premiums that increase annually until a certain age.
Term life insurance may be an ideal option for you in the following cases:
- You need coverage only for a certain period, such as the length of the mortgage or until your children finish college.
- Affordable term life insurance premiums are the best for your budget.
The second type of life insurance is whole life insurance. Whole life insurance is a type of permanent life insurance, meaning it provides coverage for your entire lifetime. Like term life insurance, whole life includes flat premiums that do not increase. However, you can count on those premiums likely to be higher than if you opted for a term policy. That’s why it’s a good idea to lock in your rates when you’re young and healthy, when your premiums are likely to be lower.
Another feature of whole life insurance is that it gives you the ability to build guaranteed cash value, which can grow tax-deferred over time. Once you build up significant cash value, you can borrow from your policy for any purpose: to help pay for college, pay off debt, or supplement your retirement income. Cash value loans will often have lower interest rates than you would get from a bank or credit card.
Whole life insurance offers a guaranteed income tax-free death benefit. You can use this death benefit to help leave a lasting financial legacy for future generations.
Whole life insurance may be an ideal option for you in the following cases:
- You want lifetime coverage and a guaranteed death benefit to leave a lasting legacy.
- You could benefit from a policy that has the ability to build cash value.
- Life insurance premiums fit your budget.
Universal life insurance
The third type of life insurance is universal life insurance. This is another type of permanent life insurance that gives you coverage for your entire life. It also includes a tax-free death benefit and the ability to build cash value.
What makes universal life insurance unique is that it offers flexible premium options. You can decide to increase or decrease your premium payments based on how fast you want your cash value to increase, within certain limits. As long as the cash value is positive, the policy remains in force. The amount and timing of your premiums will affect the cash value of your policy.
Depending on the universal life insurance policy you choose, your policy may be tied to the performance of the S&P 500 Index, sometimes with protection during down market trends. Other policies don’t protect you from falling markets; they also give you more growth potential.
In addition to flexible premiums, universal life insurance also offers a flexible death benefit. If you need less life insurance in the future, perhaps after the mortgage is paid off, you can ask the insurance company to reduce your coverage amount. If you need more, you can request an increase in coverage, with evidence that your health has not changed.
Universal life insurance may be an ideal option for you in the following cases:
- You want coverage that can last a lifetime, plus the option to adjust your death benefit.
- You want the opportunity to build tax-deferred cash value, which you may be able to use for other financial goals.
- You want flexible premiums that you can control.
- Universal life insurance is a convenient option for your budget and financial plan.
We are here to help
Still not sure which type of life insurance is best for you? Don’t worry; our agents are here to help! Call us at (800) 525-7662 and we’ll put you in touch with a local Washington National agent who can help answer all of your life insurance questions.