Life Insurance Types
Everyone that sells a book has an opinion, but nothing dictates what type of policy you should have more than how long you wish to have coverage.
Term Life InsuranceThis is pure insurance protection. It doesn't have any cash equity. It is designed to last for a certain period of time. The most popular plans are level premium where the premium stays level (the same) for 5, 10, 15, 20, 25 or even 30 yrs. A 30 yr policy would be the most expensive. The level premium policies are very cost effective for their initial guarantee period but then become cost prohibitive thereafter.
When looking at these plans, buy a policy that makes sense. You may want to question your agent who sold you a 10-year term policy if you have children that are 2 and 4 years old. What good is it if you have NO coverage when your children are 12 and 14 years old? If you're buying it for a mortgage, buy for the length of the mortgage. If you are buying to cover your family, buy until your youngest child (maybe unborn at this point) would be done college or self-supporting.
The level premium plans have seen a major changes in the last handful of years. You should consider shopping for a new policy even if it was purchased it the last 3 years. After all it doesn't cost anything to look.
Once you get a price for term coverage from our term quote engine, determine how that premium would fit in your budget. The goal here is to get the amount of insurance you need first. If the premium is comfortable then you have your answer.
Return of Premium Term (ROP Term)
Why pay premium for 10, 15, 20, or even 30 years and have nothing to show for it? A return of premium term (or ROP term)policy can refund a portion (if you cancel early) or 100% of your paid premium after the 30 years (for example). Sure it costs a little more than the zero-cash back term policies, but when you consider that you can get ALL of the premiums you paid back on a completely TAX-FREE basis, it is no wonder why this is one of the most popular types of policies to get. See our quote engine for rates on these plans.
In addition to getting your premiums back, these plans make excellent planning tools. In lieu of getting your premiums back, you can choose to take a paid-up policy (which could be 150-250% of the cash value in the form of death benefit). Or, you could possibly convert the policy to a permanent policy down the road, using the cash-back-premium as a "down payment" for the new policy.
What if I want coverage for more than 30 years?
Then, do not consider term insurance. Or, at least do not consider it for the whole amount of coverage you are seeking. If you need $500,000 of coverage, consider making $250,000-$400,000 term coverage and the rest a universal life or whole life policy. Our quote engine will quote universal life policies that will give you a guaranteed premium until you turn as much as 120 years old. Meaning no matter what happens to interest rates, markets, etc...you will know that as long as you continue to pay the premium, your policy can't be taken away.
Universal Life and Whole LifeThis is coverage that's designed to last for a longer period of time than a term insurance policy. It can be the policy that you keep for the rest of your life. Since it has a cash or equity account where the funds grow tax deferred, these policies can also be used as a retirement supplement.
If you are not sure how long you will need life insurance, then you can get a guarantee that you will always have coverage. Another advantage is that if you decide you do not need the coverage 15-25 years later you could possibly get all of your premiums back.
Whole life generally gives you a guaranteed premium and guaranteed cash values in the policy. Universal life generally does not guarantee the premium or the cash values and therefore can be sold at very inexpensive premiums. Be careful here. Agents can sell a policy at a lower rate without guarantees in place (because the guarantees cost a little more), but you may find that your policy will lapse unexpectedly down the road. We usually sell universal life policies that give you a guaranteed premium. We like the policies that guarantee your premium until you are 90 or 100 years old. If the interest rate environment were to be very low for a long period of time the cash value could go to zero, but with the guarantees your policy could remain in effect.
So, in summary if you need about $2,000,000, purchase $1.5 m of ROP Term and $500k of a universal life guaranteed to age 100 (or $1.75m and $250k). Have the term end after your mortgage is paid and/or when your youngest child is through college. Start with our quote engine and explore the best way to set up your plan. Call us if you need help, and let us know when you want an application to get started. You are just seconds away for hundreds a prices and plans.