So you’ve decided to purchase life insurance. Making this important decision is the first step in helping to protect your family financially if you pass away prematurely. In making this decision, you probably already understand the basics of life insurance—that it provides your loved ones a cash benefit if you pass away. The money can be used to replace your income, cover living expenses, pay off debts, fund college for your children, help your spouse in retirement and so much more.
But now you have another decision to make. One that’s a little more complicated. You need to figure out which type of life insurance is best for you. There are several types to choose from, and they all offer different features that can play an important role in your financial strategy. Here’s a simple rundown to help you make this decision:
This type of life insurance provides protection for a period of time—known as the “term.” This kind of insurance makes the most sense when your need for life insurance will disappear at some point, such as when your debt is paid off or your children graduate from college. The most common term duration is 20 years, but they range from one to 30+ years. Term policies typically offer the greatest amount of coverage for the lowest initial premium, making them a good choice for families on a budget.
This type of insurance offers protection for your lifetime, accumulating cash value on a tax-deferred basis. The accumulated cash can be used for many purposes, including helping you out in a tight financial spot, providing funds for opportunities or supplementing your retirement. Initial premiums for permanent life insurance are higher than what you pay for a term policy. Permanent life insurance falls into four categories, which are explained below.
With this type of insurance, premiums remain the same for life, and the death benefit and rate of return on your cash value are guaranteed.
With variable life, you seek potentially better returns by allocating your fixed premiums among investment subaccounts, typically comprised of stocks and bonds.
This type of life insurance offers the flexibility to vary the amount of your premium payments and offers the certainty of a guaranteed minimum death benefit as long as your premiums are sufficient. If you don’t maintain the minimum premiums, your death benefit may be reduced.
Premium payments are also adjustable with this type of life insurance, and are subject to the minimum needed to keep the policy in force. You can allocate your premiums among investment subaccounts that offer varying degrees of risk and reward.
Hopefully you’re closer to making your decision about which type of life insurance is best for you. However, if you’re still unsure, Bankers Life is here to help you decide. Contact a Bankers Life agent to discuss your life insurance options today.*
Source: Life Happens, What You Need to Know About Life Insurance, http://www.lifehappens.org/wp-content/uploads/2013/10/Brochure_WhatYouNeedtoKnowAboutLifeInsurance_2014_Consumer.pdf, 2014.
*Bankers Life is the marketing brand of Bankers Life and Casualty Company. Medicare supplement insurance policies sold by Colonial Penn Life Insurance Company and select policies sold in New York by Bankers Conseco Life Insurance Company (BCLIC) BCLIC is authorized to sell insurance in New York. Policies and benefits are subject to state availability.