Which Type of Life Insurance Is Right for Me?
How do you know if term life insurance or permanent life insurance is right for you? This simple quiz will help you see which type of insurance may work for you and your needs.
Keep in mind, this quiz can help you determine which type of life insurance may be right for you, but you should speak with a licensed insurance agent prior to making a purchasing decision.
The following guide can also help you consider a few different situations that may describe your circumstances. Learn more about how a life insurance policy could fit into your life and how you can better determine which type of policy may be right for you.
Life Insurance When You’re Starting a Family
A term life insurance policy can help your loved ones cover some of your financial obligations (such as a mortgage or college tuition for your children) if you’re recently married, buying a home or starting a family if you pass away unexpectedly.
You might decide to purchase a term life insurance policy that can be in effect for as long as your family is financially dependent on your income. You can consider setting a policy term that lasts until your children are financially independent or until your mortgage is paid off.
Once the policy expires, you aren’t left paying for coverage you no longer need.
Life Insurance That Can Help Ensure Your Legacy
If you want to ensure that a beneficiary receives some financial help after you pass away, a form of permanent life insurance could be a good fit.
Permanent life insurance can be a good fit for people who wish to one day leave behind a gift to their children, grandchildren, other beneficiaries or even a charity. Permanent life insurance can also be a good option for someone with a special needs child who may never be fully financially independent.
Life Insurance Without a Medical Exam
You may want life insurance coverage but don’t want to deal with undergoing a medical exam or waiting for a long underwriting process to be completed.
Simplified issue life insurance doesn’t require a medical exam and the approval process can be completed in a matter of days rather than weeks.
Simplified Issue Life Insurance policies typically require answers to a few general health questions. Issuance of the policy may depend upon answers to the health questions set forth in the application. Therefore, you still need to be in relatively good health in order to be approved.
Life Insurance With Higher Growth Potential
Certain types of life insurance carry a cash value that can accumulate over time, and the policyholder may then withdraw or borrow from those funds.1
If you’re looking for life insurance that can offer some added financial growth potential, you may want to consider a variable life insurance policy. Instead of growing only with paid premiums, the cash value of a variable life insurance policy is tied to investment vehicles such as stocks, bonds and money market funds.
Because variable life insurance is considered an investment, it represents a securities contract regulated by the federal government and must be sold with a prospectus.
The diversity of investment options can give the cash amount of a variable life insurance policy the potential to grow at a higher rate than that of other types of policies. However, variable policies can carry greater risk than other types of permanent life insurance.
Life Insurance When You Need Flexibility
As we go through life, our financial responsibilities change. Kids grow up. Mortgages get paid off. Income fluctuates. Our finances can be as unpredictable as life itself.
Universal life insurance is designed to help accommodate these evolving needs. Premiums and death benefits can be adjusted as you go, which can help you make sure your life insurance coverage is always aligned with your current finances and responsibilities.
Life Insurance for Those Who Have a Higher Income
If you have a higher income, a whole life insurance policy may be a good fit for your situation.
This type of policy features fixed premiums and can provide additional savings for a beneficiary to inherit upon your death. Fixed premiums can give you a little more certainty over the life of the policy. Whole life policies also feature a guaranteed minimum rate of return.
Life Insurance When You Are Older or Have Health Concerns
If you are older or in poor health, you may have a harder time finding a life insurance policy that fits your needs when compared to younger, healthier applicants.
Guaranteed acceptance life insurance features no medical underwriting as part of the application process. As with simplified issue life insurance, there is no physical exam required as part of the application process. Unlike simplified issue policies, however, there are also no questions asked about your health. You must be within a certain age range to qualify. The age range can vary by carrier, but 50-85 is a common example.
Death benefits are small — usually $25,000 or less. Though a beneficiary may use the proceeds however they wish, these small payouts are typically used to pay for funeral costs and other end-of-life expenses.
Guaranteed acceptance life insurance can be a good option for someone wishing to ensure a payout to a beneficiary, but whose age or health might keep them away from other types of policies.
Guaranteed acceptance life insurance policies may have a graded death benefit for an initial period of time, which is often two years. If you were to die during this period, no death benefit would be paid out but the premiums you paid would be returned.
1 Note: A permanent policy's cash value can be used to pay premiums, or may be accessed via loans or withdrawals. Policy loans and withdrawals will reduce cash values and death benefits, and may cause the policy to lapse. Additional premium payments may be required to keep the policy in force. Withdrawals may be subject to a surrender charge. Withdrawals and any unpaid loans are subject to ordinary income tax and, if taken prior to 59 1/2, a 10% federal additional tax.