Types of Life Insurance

Life insurance

Coverage as a job to be done- there are many reasons why life insurance is purchased. When considering it, there are a number of factors to take into account in your decision-making process. Because of a variety of circumstances that bring a person to the point of turning to life insurance as a solution, there are also several approaches to using life insurance to solve those problems.

Term

Term insurance is ideal when you have a specific need for a death benefit to be paid but only if the death occurs during a set period of time, known as the term. For instance, a bank may require a life insurance policy pledged as collateral for a loan to act as a guarantee of repayment. It is a popular choice when the need exists for a strictly temporary policy. There are pros and cons. Some of the cons are that the policy expires or becomes significantly more expensive at the end of the term. Some of the pros are that some term policies have a conversion privilege that enables you to convert the policy into a different type of policy that may last longer, in exchange for a difference in premium. For example, if you are in the 19th year of a 20 year policy, and develop cancer, you might choose to exercise the conversion privilege and convert all or part of the death benefit into a whole or universal life policy. The premium would be higher than what you had become accustomed to paying on the term policy, but it would be a lot less than if you had reached the end of the 20 year policy and allowed it to renew beyond the 20 years - often raising substantially each year beyond the expiration of the term. Con: No cash value accumulates in a term policy.

Whole

Whole life insurance is based on guarantees and is designed to last until you die or until age (100?). This policy usually accumulates a cash value within the policy which can be borrowed against or the policy can be cashed out, returning the surrender value to the policy owner.

Universal

Universal insurance is a type of blended policy that combines some of the benefits of term insurance and some of the benefits of whole life insurance. It may be the best choice.

How will my rate be determined?

health & lifestyle

family history

age

gender

for term and universal insurance the rate is heavily driven by the length that the coverage will last.

*** Look at life insurance buyers guide for additional ideas for content and frequently asked questions

Please perform this self assessment by asking yourself the following questions.

1. “If I die tomorrow, will the amount of life insurance benefit be sufficient to meet the needs of my surviving family and other financial obligations?”