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Life Insurance

Life Insurance

Types of Life Insurance

Life insurance quotes vary depending on the type of life insurance you want and the price difference can be considerable. Each person or families needs will be different, but most will want to cover some or all of the following needs:

  • Mortgage protection – cover the balance of their mortgage
  • Debt protection – pay off outstanding or expected debts like credit cards, car loans, etc.
  • Annual Income – How much support will the surviving spouse need to maintain quality of life? If there are children then you will also want to account for the cost of raising the children.
  • College – Be sure to include the cost of College tuition, room and board, books, and spending money.
    Inheritance – You may want to consider adding in an additional amount just to make things easier.
  • Charitable Giving – Some people choose their favorite charities as the beneficiaries of their life insurance policy.

Next you will have to choose the time frame you want to protect. The idea being that as you get older your responsibilities decrease. The balance on the mortgage is lower. the kids are finished with college. The cars are paid off. Of course it could also increase…more kids, bigger house, nicer cars, etc. There are number of different life insurance products available for you to choose from.

  • Term Life Insurance – Term life insurance is the cheapest and for most people it is the most affordable way to protect their families. Like it sounds it covers the insured for specific term or time period. Term life insurance is typically sold for periods of 5, 10, 20, an 30 years. You can buy a term insurance policy for any period you like, but you will have more options if you stick to the main ones.
    Term Life Insurance with Return of Premium – Return of premium means that if the insured does not NOT die in the contracted period then the insurer will refund the premiums paid. These plans typically cost more the just “plain” term insurance.
    Decreasing Term Life Insurance – Not my favorite, but it has its benefits. Over time the benefit amount decreases. This is perfect if all you want to do is insure for the outstanding amount a loan or mortgage. This does lower the premium but it may also removes other option like convertibility and renewability.
  • Universal Life Insurance – UL insurance is a hybrid plan that incorporates part term insurance with an investment account. The objective is to use the earnings of the investment portion of the account to pay for the increasing cost of the insurance. The premium is flexible so the more you pay the longer it will last. Universal life plans are usually quoted “to age 100″. However, it is possible to get the quotes for a different age. For example: Premiums for a plan “to age 90″ would be lower than those for a plan “to age 100″.
  • Variable Life Insurance – Variable life insurance policies also have an investment account. It really depends on the company and your broker. These plan can be actively managed, buy and selling stacks and mutual funds. The objective is to earn a higher interest rate by actively investing in the stock and bond markets. Of course if the market goes down so does your account value.
  • Whole Life Insurance – Whole life insurance policies are designed to cover you for your whole life. Premiums will also be for your whol life unless you request “to age 65″, 20 years, or something similar. These policies do build a cash value and the interest paid on the account is also guaranteed. This allows you to build equity on your policy and if you choose you can tap into it if you need it. The alternative would be to buy a term policy and then invest the difference.
  • Guaranteed Issue Life Insurance – These policies are issued with no concern about your health. They tend to for low benefit amounts and the price is considerably higher than a medically underwritten policy.
  • No Medical Life Insurance – No medical policies don’t require medical exams, but you will still have medical questions on the application and they may also request medical records.
  • Final Expense Life Insurance – Final expense policies are usually very easy to get and are really just to cover final expenses. The benefit amounts are low and as a result premiums are fairly low also.