Let’s face it, Insurance in general is a very confusing, and at times frustrating, topic!
When shopping for life insurance, the sheer number of options makes it even more difficult to ensure you’re making the right choice to protect your family and assets.
To make matters worse, selecting the wrong life insurance coverage can lead to a big financial toll, leaving your loved ones without the protection they need in the event of your death.
If you are shopping around for life insurance and aren’t sure what factors to consider, this article is for you. We will discuss the main types of life insurance, the benefits and drawbacks of each, and the factors and variables that should be taken into consideration when choosing a life insurance policy.
There are several benefits and drawbacks to each type of life insurance. Here is a breakdown of term vs. whole life insurance to help you make the right decision for your unique needs and concerns:
Permanent life insurance
Aptly named, permanent life insurance is designed to cover you for your entire life. While it is more complex than term life insurance and is typically more expensive, this type of life insurance also offers additional benefits.
Permanent life insurance provides a death benefit as well as a cash value accumulation that builds throughout the life of the policy. The cash value amount is based on how much the return on investment is worth. It usually takes about 12 to 15 years to build a decent cash value, and a portion of the cash value can be withdrawn or borrowed during the life of the policy.
There are three main types of permanent life insurance from which to choose: whole life insurance, universal life insurance and variable life insurance. Whole life insurance offers fixed premiums for the life of the policy. As premiums are paid, cash value can be built in the policy, and depending on the company, whole life insurance may also pay dividends. Universal life insurance policies are a bit more flexible than whole life policies, giving you the option to adjust your death benefit or premiums with certain limits. A variable life insurance policy offers a broader range of investment options and is tied to market performance, making it a good choice for those comfortable with assuming more risk.
To qualify for a permanent life insurance policy, you typically have to pass a health examination. Although you can purchase permanent life insurance without a medical exam, it will be more expensive. Also, while this type of policy initially has more expensive premiums than term life insurance, it can potentially help you save money over the length of the policy if it is in effect for a considerable number of years.
Permanent life insurance can also be a good choice if you are considering setting up an estate, or if you are concerned about estate taxes.
Term life insurance
Term life insurance is more affordable and much easier to understand than permanent life insurance. This type of insurance provides coverage for a set length of time and is designed to only protect your dependents by providing a payout (or death benefit) in the event that you die prematurely. Term life insurance provides only death benefits.
You choose the length of the term when you purchase the policy, with the most common terms being 10, 15, 20 or 30 years. If you want coverage to extend beyond the length of the term you choose, you must renew the policy. Both the death benefit and the premium typically remain the same throughout the term of the policy, but the policy itself becomes more expensive as you age, especially after 50. Term life insurance can also be used as temporary supplemental coverage with a permanent life insurance policy and can also be converted to whole life insurance.
General life insurance considerations
When shopping for a life insurance policy, there are many factors that should be taken into consideration. Here are some of the main factors to consider:
- Your age
- The age of your children
- The current state of your health
- The financial needs of your dependents
- Funeral and other planned death expenses
- Potential long-term health expenses for any serious medical conditions
- Your mortgage and other current debts
- Your plans for retirement
- Any needs for an additional retirement savings plan
- Future financial needs of your dependents (e.g. college funds)
- Any plans you have concerning opening an estate account
- Establishing a trust as part of your will
- Whether or not you wish to donate any life insurance proceeds to a charitable organizationTer
- Whether or not you are comfortable with potentially investing in term life insurance and not receiving any return from the policy
These are some of the main factors worth considering when choosing between a term life insurance and permanent life insurance policy. The knowledgeable experts at Schuler Insurance can help you evaluate these variables and more to help you determine whether term life insurance or permanent life insurance is the best option for you.
Schuler Insurance is an independent Texas life insurance company that offers simple and affordable life insurance solutions. Our comprehensive strategy focuses on the customer first, ensuring they receive tailored coverage that fits their unique needs.
We offer affordable, convertible term life insurance policies with 10, 15, 20 and 30-year terms, with premiums that are generally guaranteed and optional child riders. Our permanent life insurance policies are offered as whole life, universal life or guaranteed universal, with flexible premiums, cash value and policy loans.
At Schuler Insurance Services, we are dedicated to helping you find the best life insurance policy possible so you can be sure your dependents and assets are properly protected. Texas residents count on Schuler Insurance to provide the peace of mind that comes with knowing that they and their loved ones have a financial safety net should the worst happen. What type of life insurance is best for you? Contact us today and we will help you decide.