So, you know you want life insurance. But now what?
With all the life insurance agents in your community, the geckos asking for 15 minutes, the financial advisors saying they also do insurance, insurance companies sponsoring sports games, and then finally family nagging that you buy, buy, buy, it can be difficult to not feel sold. Difficult to feel like you can stop, look at your options, and get the plan that’s right for you. Please feel free to Stop. Please feel free to read about your options. And know that if you are still interested in knowing more, we will be more than happy to truly do our best to find that plan that’s right for you, no matter what company it is. Because before we go into companies, let’s start with types of life insurance.
Whole Life insurance is a type of permanent insurance. By permanent, we mean that as long as you continue to pay the premiums, the life insurance will remain in force as long as you need it. Whole life is sold a lot by large mutual life insurance companies, and although they sell it a lot, many people that buy it do not know why they bought it. They usually are sold on the cash value aspect, but rarely understand how the cash value works, or how to access it when they want or need it. When making a decision to purchase a life insurance policy for the rest of your life, make sure you have an agent that might actually be around. Many people that buy whole life find that later in life, when they need an agent to assist, there agent either is no longer at the company, no longer in the industry, or even worse, no longer alive. So just as important as a whole life policy that is tailored to you, is an insurance agent that you trust.
Term life insurance is best compared to renting. You rent the death benefit for a specific period of time like a lease. When the lease is up, the benefit is gone and the company keeps the money. Term is significantly less expensive, which is why it is usually the most common. Term policies can be for almost any period of time. Many large mutual insurance companies will tell you that there is a 5 year, a 10 year and a 20 year. The truth is, there are term insurance policies for almost any length of time, yet the most common are 30 years or less. The question is, how long will you need the coverage for? Next question becomes how long do you want the coverage for?
Universal life is also a permanent life insurance policy. Like Whole Life, it has a cash value. Yet, Whole Life typically will be more because it is designed to have a larger cash value. Universal Life policies can be designed and tailored to each client so, they can have more, less or the same cash value as whole life. In fact, many people buy universal life simply to guarantee that a death benefit is paid at their death, yet they only pay enough to keep it, no more, no less. Therefore, in this case, there would be little to no cash value, but the death benefit would stay in force. Many clients enjoy this, because if they pass away with cash value in their policy, the insurance company typically will only pay the death benefit, not the death benefit plus the cash value. This is an important point in making a decision to purchase permanent life insurance.
Survivorship life is a very common type of life insurance policy for estate planning. Survivorship policies are life insurance policies that cover two people and pay the death benefit upon the passing of the second insured. Because insurance companies pay after two people pass away instead of one, there is usually better leverage for premium dollars. Therefore, a couple that is attempting to leave more money to their heirs should seriously consider a survivorship policy. In most cases, a 2 million dollar survivorship policy will be less expensive than two 1 million dollar individual life policies.