(And finding the best life insurance solution for you)
Candace Jenkins|November 11, 2019
When planning your future, it is important to know what your options are. Term life insurance is one of the many different solutions when comparing a number of protection vehicles to help you be proactive.
Determining if term life insurance is the right policy for you can be discussed with your independent insurance agent. Your agent can present a variety of life insurance options to suit your coverage needs and budget.
What Is Term Life Insurance?
Term life insurance is an insurance product that provides a preset coverage limit known as a death benefit for a set period of time. The death benefit amount can be anywhere from $5,000 to in the millions and the policy term is typically set for ten, twenty, or thirty year increments.
How Does Term Life Insurance Compare to Other Life Insurance?
First, it is important to know what the other life insurance options available to you are when planning for your future. You should also know some key terms that come up when discussing life insurance with your independent insurance agent.
Beneficiary: In a life insurance policy, the beneficiary is the person that is preselected by the named insured (aka you), and is the individual who will receive the death benefit. The beneficiary should be someone you trust to do the right thing with the death benefit funds such as pay off remaining debts, mortgages, funeral expenses, and setting up trust funds for surviving children.
Death benefit: This is the amount paid to the beneficiary upon the death of the named insured of a life policy.
Cash value: This is the cash amount that has accumulated or has been paid into a permanent life insurance policy or an annuity and is issued when the cash value is borrowed against or when the life policy is canceled.
Different life insurance policies:
Term life insurance: This type has been discussed, but to reiterate: term life insurance provides a preset death benefit of your choosing and the insurance company's allowance. You will also select the length of time you would like the policy to be in effect, typically in ten, twenty or thirty year increments.
Term life insurance is to protect your loved ones and beneficiaries from taking on any of your financial burdens should you pass within the allotted time frame selected. Once the policy expiration date is due, there are a few options that may be chosen.
1.) You will be given the option to transition your term life policy into a permanent life insurance policy. This option will be rated on your current age and health status which can be costly.
2.) You can sometimes extend the term an additional amount of time. Again, you will be rerated based on your current age and health status causing the premiums to increase significantly.
3.) You can choose to surrender your policy and simply let it expire. If you have planned accordingly and set aside enough funding to secure your loved one's financial security when you pass, then this can be a viable option.
Permanent life insurance: Permanent life insurance is just like it sounds, permanent. This type of life insurance lasts for as long as you do and also has some other benefit options that can work in your favor.
The death benefit works in a similar way to a term life insurance policy as it is predetermined and will pay out to the beneficiary once you pass. There is what's called a cash value in a permanent life policy that can be borrowed against and even used as funds for retirement as it grows.
This solution comes with a number of different product offerings. From whole life to universal life to an indexed life policy, the options and combinations can be different depending on the carrier. The two most common are whole life and universal life insurance, and it's important to know the difference.
Whole life insurance: This is a permanent life insurance policy that has a fixed premium rate, meaning your premiums are locked in for the life of the policy. You will also have a cash value that can be borrowed against.
This is actually how the famous Walt Disney came up with the seed money to start Disney World. With a whole life policy, dreams do come true.
One thing to make note of, if you do take out a loan against the cash value and do not pay it back, it is likely that the interest accumulated will eat up the death benefit until the policy inevitably has to cancel. So moral of the story, pay back your loans or you'll have nothing left to show for it.
Universal life insurance: This permanent life policy has a sweet feature of taking any excess premium paid above and beyond the regular payment amount and crediting it to the cash value on the policy, which is then credited with interest that is accumulating.
That accumulation can be borrowed against if your policy allows or can be used as a nice savings account for your retirement fund when you're ready. Unlike a whole life policy, your rates are not locked in.
They have more flexibility, allowing you to increase or decrease your death benefit amount so you can pay more or fewer premium dollars should your financial situation change.
As you can see, there are options and you've got 'em. To know which life policy is right for you depends on a variety of factors that should be discussed with your independent insurance agent.
How To Compare Life Insurance Quotes
The best resource you have when it comes to comparing term life insurance to other life products is your independent insurance agent. They work with a large number of insurance companies so they can narrow down the best life insurance options for you.
Life insurance is a personal product. It needs to be tailored to your specifications, where you are in life, and where you think you will be at ten, twenty, and even a hundred years from now.
Sounds daunting, but if you don't plan for your future who will?
The Benefits of Working with an Independent Insurance Agent
There are many benefits of working with an independent insurance agent but a few of the most important ones are that they work for you, not the big fancy insurance companies.
They work with a ton of carriers so you'll have options. They are knowledgeable, and can provide you with a handpicked selection of life insurance policies to choose from.
They can show you different solutions you didn't know you didn't know. That way you are sure you are making an educated decision. After all, this is your future and the future of your loved ones. It's probably best not to leave it up to chance.