The type of life insurance policy you should get depends on what your beneficiaries need if you died prematurely. Other considerations are your budget, age and health. There are a multitude of life insurance policy types. Below we’ll look at the basics and the protection they offer.
Term Life Insurance
This type of life insurance product is a pre-determined sum of money paid to beneficiaries upon the insured’s death. The coverage is provided throughout the term of the policy. This is the most common type of life insurance.
For example, a Term-10 policy could be worth $100,000 for 10-years. If the insured dies within this time, the beneficiaries receive $100,000. If the insured doesn’t die, the policy ends at the end of the 10 years. Usually this policy is used to protect the insured family until a certain life event is reached – raising a child to adulthood, or paying off the mortgage, for example.
Permanent Life Insurance
Another life insurance product is permanent insurance. This is different than term because it doesn’t expire, and combines a savings portion with a death benefit. There are two kinds of permanent life insurance: whole life and universal life. Each of these has pros and cons.
Due to the savings component, this type of insurance is more expensive than term; but, if money is an issue, it’s possible to get a smaller insurance policy or get a term policy that can be later converted to permanent.
Over time, permanent insurance can grow significant cash values, which the policy holder can use via surrender, policy loans or leveraging.
No Medical Life Insurance
If your health is poor or you don’t want a medical exam, you can still get life insurance. It’s called no medical life insurance. It’s available with both term life and permanent life policies.
No medical life insurance means you don’t have to have a medical test. There are two types insurance which fall under this umbrella.
Guaranteed Life: With this coverage your acceptance is guaranteed. If you have pre-existing medical condition it doesn’t matter – you’re covered. Coverage is between $5,000 – $25,000. You must live for the first two years of the policy being in force for it to pay out. If you die within that timeframe, a portion, or all, of the premiums are returned, depending on the policy.
Simplified Issue: To get this coverage you must complete a medical questionnaire consisting of 3-15 broad health questions. To qualify you must answer ‘no’ to the questions. Coverage is between $25,000 and $250,000. Again, a two-year waiting period is in effect.
Life insurance companies vary greatly. They each have different underwriting processes, guidelines, standards, categories, and products. This is beneficial to consumers because the industry is so competitive, thus you have choices. However, you need expert advice to research what type of life insurance policy to get.
Life insurance needs are individual, so what type of life insurance policy you should get is much different than the policy your sibling or neighbour needs.
To take advantage of all the options you have to get the perfect life insurance policy for you, call me to get started.