Luis Pazos 
When people think about life insurance policies, they often just think about term life insurance. Term life insurance is basic, popular, and commonly purchased, but it’s just one option in the wide range of life insurance policies available today. Understanding the different types can help you find coverage that meets your needs better.
Term Life Insurance
Term life insurance is straightforward and provides a death benefit without any cash value component. It’s often very affordable, especially for younger, healthy applicants. This type of insurance is purchased for a specified period, such as 5, 10, 15, 20, or even 30 years. There’s also a one-year renewable option, where you need to re-qualify based on your current age and health status once the term ends. If you want to keep your coverage after the term ends, you may have to pay a higher premium or convert it to a permanent life insurance plan.
Permanent Life Insurance
Permanent life insurance offers both a death benefit and a cash value component and is meant to last for the insured’s lifetime as long as premiums are paid.
Whole Life Insurance
Whole life insurance has a fixed premium for the lifetime of the policy, which makes it budget-friendly. The premiums contribute to a cash value component that grows tax-deferred. Over time, the cash value can grow significantly, especially with dividends, although these are not guaranteed.
Universal Life Insurance
Universal life insurance is flexible, allowing you to adjust how much of your premium goes into the death benefit versus the cash value. It also grows tax-deferred. You can borrow against or withdraw from the cash value for various reasons.
Variable Life Insurance
Variable life insurance allows you to invest the cash value into various options like stocks, making it potentially more lucrative but riskier. The death benefit can fluctuate based on market performance but won’t fall below the guaranteed amount.
Variable Universal Life Insurance
Similar to universal life insurance but with investment options for the cash value, variable universal life insurance does not guarantee a minimum cash value.
Survivorship Life Insurance
These policies cover more than one person and pay out upon the death of one or both insureds, depending on the type. Premiums can be lower than two separate policies, and underwriting may be less strict.
Final Expense Life Insurance
Geared towards seniors, final expense life insurance covers funeral and related costs. This can be either term or permanent and usually has lenient underwriting requirements.
No Exam Life Insurance
No exam life insurance doesn’t require a medical exam, making it ideal for those with health issues. It’s often approved quickly but might come with higher premiums.
Key Man Life Insurance
Key man insurance protects businesses by covering crucial employees. The company owns and is the beneficiary of the policy, using it to safeguard against financial loss due to an employee’s death.
Increasing and Decreasing Term Life Insurance
Some term policies have death benefits that increase or decrease over time. Decreasing term life insurance, often used to cover a mortgage, decreases in coverage as the mortgage balance decreases. Increasing term life insurance can be added as a rider to keep up with the rising needs of a growing family.
Understanding Cash Value
Cash value in a life insurance policy grows from the premiums paid. It can be borrowed against or used to keep the policy in force. Holding onto a policy until death or retirement allows maximum gains.
Tax Benefits
Life insurance policies offer tax benefits similar to retirement accounts. Investment earnings aren’t taxed annually, and gains from a death benefit are also often tax-free.
Getting the Best Premium
Getting quotes from different insurers can help find the best premium. The right type of coverage depends on your circumstances and understanding the various options will help you make an informed decision.
Final Thoughts
Choosing the right life insurance policy involves considering all available options. Term life insurance is common, but permanent options like whole life, universal life, and variable life provide different benefits. Final expense and no exam policies serve specific needs for seniors and those with health concerns, while key man insurance supports businesses. Understanding tax benefits and finding the best premiums often requires professional advice. Align your coverage with your needs to make the best choice.
