There are many types of life insurance being sold today, and what is appropriate for you and your family is dependent on your specific situation. There is no right type of policy that fits everyone’s needs. The following is a brief description of some of the types currently available and their pros and cons.
Group Life Insurance
These policies are quite often offered by an employer or union for the benefit of the employee. At entry level they often provide one or two year’s annual salary as the death benefit, with an option to purchase additional coverage to a specified limit.
Term (or Temporary) Insurance
Term policies as their name describes, is meant to protect your life for a specific length of time. It may be for a single year, five years, ten years, 20 years, or even 30 years. Most term policies today are renewable at the end of the term, but the premiums increase significantly. With some variation by insurance carriers, most term policy’s “term” ends around age 75. And, even though the policies may be renewable, the increase in premium makes the continuation of the policy prohibitive.
Permanent Life Insurance
The final category are permanent policies. They have several variations including; Whole Life Insurance, Universal Life, Indexed Universal Life, and Variable Universal Life. These products remain in effect as long as the premiums are paid, usually with the same premium throughout the entire contract. Since they continue for one’s entire lifetime the insurance company will pay a death benefit 100% of the time. In many cases they generate a cash value that may be accessed during the policy owner’s lifetime.
There are also many “hybrid” policies marketed by various companies. These will combine the features of two or more types listed above.
When you are setting up a financial plan for you and your family, or specifically in the market for life insurance, the first step is to find a trusted financial advisor who can explain your options in regards to your specific needs.
For more information on the different types of life insurance or for help determining which option is best for you, please contact Russ Morris.