When selecting life insurance, most clients just want a simple explanation. They are not looking for a complex analysis of all the features, riders, and insurance speak.
Here are some simple basics that can be of assistance:
1. There are 3 types of different types of life insurance- Term life, whole life, and Universal Life (Each one has many variations).
a. Term life is like a renting insurance for a period of time at a level rate (for example 10 year, 20 year, or 30 year). No equity is built and you have a death benefit only as long as you pay.
b. Whole life insurance is designed to last for your whole life (permanent insurance). It is a level premium that starts off much higher than term, but remains level for the life of the contract. When term rates go way up after the level period, they will surpass what is being paid on the whole life. Whole life builds equity (cash value) that can be used and borrowed against during the course of your life. Unlike the concept of renting with term, this is like owning/buying your insurance.
c. Universal Life is another permanent insurance like whole life, but with much more flexibility. The premium is flexible and allows the policyholder to pay the premium that best allows them to achieve their goals. For example, a guaranteed universal life is just enough premium to have a death benefit for the rest of your life. On the guaranteed universal, you have no cash value build up to speak of. If you fund the policy at the maximum level, you can create a large cash value for retirement use. The premium level paid can be adjusted at anytime to meet the owners objectives. Like whole life, it is owning your insurance, but with more flexibility than whole life.
2. Which one is right for you? Everyone is different and has different goals. The main thing is to decide what the goal is of the insurance and then to maximize based on your goals. Often times our clients will use a blend of more than one to achieve multiple goals. For a free analysis, email email@example.com.