Life insurance requires extensive consideration when choosing a policy, from finding out which policy best fits your needs and budget to understanding its features and restrictions.
Consider all the expenses your family incurs, including replacing lost income, mortgage payments and children’s education expenses as well as any additional costs you might face. Then add any unforeseen costs you might face.
Term Life
Term life policies provide temporary but comprehensive protection, typically 10, 20, or 30 years. Unlike permanent policies like whole life insurance or universal life policies, term policies don’t accrue cash value and only pay out their death benefit in case you die during their term.
Term life insurance tends to be less costly than whole and universal policies; however, should you renew or end the policy early due to renewal premiums being higher.
Selecting the appropriate term length can be crucial. If you have long-term financial obligations such as your mortgage, choosing the longest available policy term could ensure coverage is provided even after debts have been cleared away.
Whole Life
Whole life policies offer permanent policies with both death benefits and cash value accumulation features, along with optional riders to invest the accumulated value. Mutual insurers such as Guardian can earn annual dividends that allow their whole life policies to increase in cash value beyond any guaranteed rate, which could then be used for purchasing additional coverage, paying down premiums or covering ongoing living expenses.
Whole life premiums tend to be higher than other permanent insurance, and their costs can fluctuate over time. Therefore, it’s wise to seek advice from an advisor with a holistic view who can show how this product fits into your long-term financial goals and compare its financial strength ratings among insurers before making your final decision.
Universal Life
Universal life provides greater flexibility to adjust death benefit payout or premium payments as your needs and budget change.
Depending on the policy, universal life policies may also offer investment savings components and loan options. Index-linked policies allow cash values to track indexes such as S&P 500, Dow Jones Industrial Average or Nasdaq while participation rate policies enable insurance companies to take a share of any gains associated with those indexes.
However, these gains may not always materialize at a time when needed. Before considering these types of life insurance products, it is advisable to discuss your investment goals with a fee-only financial planner as they will help ensure you understand how your plan operates and whether it suits you best.
Simplified Issue
Simplified Issue insurance allows you to bypass a full medical underwriting process, including an exam, by filling out a short health questionnaire instead. Your insurer then determines your premiums according to this questionnaire’s results.
Simplified issue policies typically offer lower coverage amounts than fully underwritten life insurance, yet provide faster turnaround and don’t require medical exams which many find daunting.
Young, healthy individuals who find the lengthy underwriting and medical exam process difficult may benefit from temporary life insurance plans; but they may also be an ideal solution for those who have serious health concerns who would likely be denied traditional policies. Because temporary life policies tend to cost more, it’s wise to shop around and compare quotes before settling on one option.
Instant Approval
This type of policy bypasses medical examination in favor of using data services like credit bureaus, motor vehicle departments, pharmacy databases and others to gather and determine risk. Although this type of coverage can offer much faster approval processes than others do, its approval rate might not look so attractive for clients with preexisting health conditions that don’t pass underwriting criteria.
Accelerated underwriting provides clients with similar coverage and premium as those who undergo traditional underwriting, but the cost will likely be higher since their preferred rating won’t apply anymore. Accelerated underwriting may be beneficial for advisors working with accumulators or individuals without much time available who want life insurance quickly and easily – just remember to always be completely truthful on any application for life insurance coverage!