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TERM LIFE INSURANCE

Many people know life insurance is a necessity but tend to avoid obtaining it for what seems to be obvious reasons -- Money.

 

That's where Term Life comes into play, low premium coverage. The difference between term and whole life is that it only lasts for a certain amount of years hence the name for this policy. You can get anywhere from 10, 20, or even a 30-year policy.

If i outlive my term policy, what are my next steps?
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Once your term policy is over you'll have a few available options:

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  • Let the policy expire with no renewal or beginning a new policy.

  • Before expiration, if available, convert the policy to either a Whole Life or Universal Life policy.

  • Extend the policy on an annual renewable term basis. 

  • Begin a new term policy.

  • All options are subject to higher premiums due to age.

PROS

  • Term is the most affordable life insurance you can buy.

  • Term policies are easy to understand, so you don’t have to worry about hidden fees, exclusions, or risks.

  • You can cancel a term policy before it expires.

CONS

  • When the policy expires, so will your coverage; if you still want to be insured you’ll have to either shop for a new policy or convert the policy into a permanent version, which can be expensive.

WHOLE LIFE INSURANCE

Whole life also called 'Permanent Life' covers until the insured dies.

This type of policy comes with a (tax-deferred) Cash Value account which is an awesome advantage and accumulates money at the current market interest rate without having to actually take a risk into the market and is usually based on the S&P 500 index. Funds are available to withdraw for any use while you're still alive. This is not deducted from the policy death benefit amount.

 

Also, the death benefit is tax-free to your beneficiary and/or beneficiaries. It is made to provide protection for the insured's life to age 100. No need to renew or providing proof of insurability again. Premiums for a whole life policy are set in stone when the policy is purchased and will never change.

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PROS

  • It will pay a benefit. 

  • It has predictable premiums.

  • It’s an asset.

  • It may pay dividends.

  • It has tax advantages.

CONS

  • It is one of the more expensive options

  • It is one of the more complex options for life insurance 

UNIVERSAL LIFE INSURANCE

Universal Life is a unique type of life insurance policy in the sense that it combines both benefits of a permanent life policy, having a cash value account plus coverage to an endowed age of 100 and Term life policy affordable flexible premium and the flexibility to decrease or increase the policy death benefit amount.

 

Universal Life allows your cash value to grow or stay at the agreed interest rate and is mirrored against the S&P 500 (Or other preferred indexes by the carrier.) This is great for individuals who want to earn on the cash value account but don't want to actually participate or place risk in the stock market.

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PROS

  • Universal can be useful as part of a highly customized personal finance or estate planning strategy. For example, universal life insurance might be beneficial for you if you have a lot of money and other assets to work with.

  • It is based on the index of the market, but will never go below zero percent.

  • It is a great retirement plan.

  • You can access up to 100% of death benefit while you’re alive.

CONS

  • Universal is far more expensive than term insurance. Because of the cost, people frequently buy less coverage than they actually need.

  • It’s more complicated to buy because there are lots of ways to customize the policy for your specific goals.

  • Depending on the type of permanent policy, you could see your death benefit shrink and/or premiums rise over time, or the cash value portion could decrease.

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