The Different Types of Life Insurance Coverage
There are many types of life insurance. Life insurance comes in all shapes and sizes. Trying to figure out which types of life insurance best suit your needs can be a bit confusing.
Of these two types of life insurance, temporary life insurance is one of the most common and one of the easiest types of life insurance to understand. Temporary life insurance remains in effect only for a specific amount of time.
A second type of life insurance is a permanent life insurance policy. Permanent life insurance policies remain in effect for your entire life. The most common types of permanent life insurance are whole life insurance and universal life insurance.
An important thing to keep in mind when looking at different types of life insurance, is to choose the one that best meets your needs.
Have questions about the different types of life insurance coverage that are available? Please, give us a call or send us a message and we will help you (888) 777-7574.
Term Life Insurance
Out of all of the types of life insurance available, term life insurance is one of the most common and most purchased types of life insurance. Term life insurance policies offer greater coverage amounts for a lower premium price, when compared to other types of life insurance.
Term life insurance death benefit coverage can range from several thousand dollars to millions of dollars in coverage. Term life insurance lengths generally come in fixed intervals of 10 years, 15 years, 20 years, 25 years and 30 years of coverage.
The death benefit of a term life insurance policy is payable to a beneficiary, if the insured dies during the term period. There is no death benefit payout if the insured outlives the term period. If the insured outlives the policy term, the policy simply expires. There is no cash build up on a term policy.
Another variation of term life insurance is no medical exam. No medical exam term life insurance is are for those that want to avoid waiting for coverage or undergo a medical examination.
No Medical Exam Term Life Insurance
No medical exam term life insurance is still the same as regular term life insurance, however it does not require the insured to go through a medical examination. No medical term life insurance policy products are usually issued quicker than traditional term life insurance, due to the lack of various medical information and history required.
No medical life insurance policies will generally cost a little more than regular term life insurance, but with the added convenience of a quick issue time and not having to undergo a medical exams. No medical exam term life insurance policies generally have a limit on the amount of death benefit that can be applied for.
Guaranteed Universal Life Insurance (Permanent)
Guaranteed universal life insurance is similar to whole life insurance. Both of these types of life insurance cover the insured person for their entire life. The premium of a guaranteed universal life insurance policy is fixed and will not change, provided the life insurance premiums are paid when due and the face amount remains the same.
Guaranteed universal life insurance policies can sometimes accumulate a tax-deferred cash value. The cash value is accessible to borrow against or withdraw from to cover unexpected life expenses. Universal life insurance differs from whole life in that it allows more flexibility. Policyholders can change the death benefit amount and premium payments as desired.
How Much Life Insurance do you Need?
When looking at the many types of life insurance, how do you determine the amount of coverage? This is not an easy question to answer. Insurance needs are complex and differ from person to person. However, we can help you make the choice easier.
The best approach is to look at your present and future financial needs. Age and income are another factor when determining the amount of insurance coverage that you need. The general rule of thumb for determining an adequate amount of life insurance coverage is to multiply your current gross income (income before taxes) by a minimum of 5.
Life insurance will provide your surviving family members with the money to cover outstanding debts and everyday expenditures after your death. In addition, it could also be useful to cover other major expenses, such as mortgages and other debts.
How Much Life Insurance Coverage Do You Need?
When considering how much death benefit protection you will need, factor in the following common financial expenses.
YOUR GROSS ANNUAL INCOME REPLACEMENT – multiply this number by the number of year needed to protect your family. Include regular bonuses and wage increase. (Generally this number is multiplied by at least 5-12.)
CASH NEEDS AND FINAL EXPENSES – costs of funeral expenses plus other costs associated with death, such as medical expenses for a last illness, estate settlement cost, property transfer costs, etc.
DEBT PAYMENT FUND – an amount required to pay existing debts that may become due immediately, such as car loans, credit cards, loans, etc.
MORTGAGE PROTECTION – an amount required to pay off the balance of the mortgage on the family home to allow the family to keep it.
EMERGENCY FUNDS – a fund set aside to meet routine emergencies of daily living, such as car repairs and home repairs.
EDUCATION FUNDS – an amount needed in the future to help fund children’s higher education.
NOTE: If you are unsure about the amount of life insurance you need to suitably protect your family, or if you have any questions about the different types of life insurance, please contact us and a representative of Top Quote Life Insurance will help you calculate an appropriate life insurance coverage amount.
Term or Permanent Life Insurance?
How do you determine which of these types of life insurance to choose? This is another question that doesn’t have an easy answer. The only true answer to this age old question is to know exactly when you are going to die, and then a policy could be designed to specifically meet your needs.
Since more than likely you do not know when you will die, the best type of policy will be a policy that meets your financial goals and needs over your lifetime, so a policy will be active when death occurs or the need for protection ends.
When Choosing Between a Term Policy or a Permanent Policy Considers This:
Term Life Insurance:
- Cheapest form of life insurance coverage with a 10 year policy being the cheapest
- Great for covering needs for specific time frames such as 10, 15, 20, 25 or 30 year term lengths
- Renewable and in some cases convertible to permanent coverage
- Best source for temporary protection to solve temporary needs
Permanent Life Insurance:
- If you have long-term needs or permanent needs, consider permanent life insurance coverage
- Insurance does not require you to medical qualify in later years
- Coverage will not result in an increase of premium in later years
- Guaranteed to pay out a claim as it will always be there
Need Help Choosing?
Determining which types of life insurance coverage is best for you can be a little difficult. Remember to consider your circumstances and your overall financial goals. Cover your temporary needs with term and your long term needs with a permanent policy. In many cases a combination of term and permanent insurance can be the right solution!
Need help with coverage options? Call us toll free 888-777-7574 or send us a message below and we will help you pick a type of coverage best for you.