The biggest choice a person will need to make in choosing the right life insurance policy will be to decide whether a term, whole, or other type of policy will best fit the individual needs of the person and their beneficiaries. There are many differences between the various types of policies and the right solution will largely depend on the reason why a person is purchasing life insurance and what they hope to gain from the coverage. There are more detailed contracts that fall under both the term and whole-life umbrella terms, but the first decision between these major groups will point a person in the right direction.
The most common type of policy is what is known as term life insurance. In this insurance structure a certain amount of time is defined as the length of coverage. A term policy may have a small period of only a year or could range to longer policies that cover several decades of time. The term and the payment (upon death of the holder) are the key variables in a term life insurance policy. The other major variable is your health (and other personal health related characteristics, such as your family’s medical history).
In contrast to the term policies is the whole-life insurance policy, which will last for the entirety of the policy holder’s life unless a cancellation occurs. This can happen if you decide to remove your money from the contract or if the policy lapses due to nonpayment of the premiums. In general, a whole-life policy will be more expensive than a term life policy.
Some people choose to take a life insurance policy as a form of protection against an early death while others use the policy more as a form of investment. The identification of the underlying motive behind the decision to procure a life insurance policy will make a big impact on which policy will be the right choice. For a person that simply wants low cost coverage in the case of an accident, the best choice will be a term life policy that can be renewed after it has reached the maturity date. This will keep the expenses of the life insurance low while at the same time providing confidence that a beneficiary will be taken care of should an accident occur.
The other option is to view life insurance as an investment. With the whole-life policies, the amount of money that is paid in premiums will eventually be paid out as a death benefit. The term life contracts will have no investment value and there are no benefits paid to the policy holder at the termination of the policy. The downsides of a whole-life policy are that the premiums will certainly be higher and the investment choices are limited.
Variable and universal life insurance policies offer more freedom and flexibility to the policy holder. In the latter version, the details of the contract are not set in stone and the insured party can opt to make changes to the level of coverage depending on life changes. In a variable insurance policy, the money is invested in specific market accounts that are named by the policy holder. This does involve risk, but successful investment can greatly increase the end value of the life insurance policy. A life insurance advisor can help by talking to a person about their specific insurance needs and identifying the policy that will meet those needs at the best cost and value.
Life insurance is a very emotionally-charged topic. Despite its rather sterile form, this decision is an important one. It is important to obtain multiple quotes to ensure that you are receiving the best possible price for the coverage you want, from a company that will be there for your loved ones when they need it most. Our network of providers prides themselves on their ability to meet your needs.