Life Insurance Simplified

Life insurance is one of the best ways to reduce the financial burden on your family in the event of an unexpected death. The options can be confusing, so how do you know which policy is right for you? In making a decision, it’s helpful to understand three basic types of life insurances available: Term, Whole, and Universal Life.

Term Life Insurance

Term life insurance is usually the most affordable option. A term life insurance policy provides coverage for a specific period of time (anywhere from 1 to 30 years). If you die within the time period in your policy, your beneficiaries will be paid your policy’s face value. Term life insurance is the most basic option—you’re paying for the death benefit, nothing else. Term life insurance is ideal if you’re looking for a low-cost option or if you need coverage only for a specific period of time, such as during your working years or until your children graduate college. It’s a simple policy that provides income protection for your family in the event of your death.

Whole Life Insurance

Similar to term life insurance, whole life insurance provides a death benefit. However, a whole life insurance policy also has a cash value. The main advantage of having a policy with a cash value is that you may be able to borrow funds or even cash out. The cash value is partially funded by your monthly or annual premium. In the first few years of the policy, a large part of the premium is used to maintain the death benefit. Over time, more of the premium goes toward funding the cash value. Because of this cash value feature, a whole life policy may be more expensive than a comparable term life policy. The policy remains active as long as the premiums are paid.

Universal Life Insurance

Universal life coverage offers the same type of coverage and cash value as whole life insurance, but offers greater flexibility. The benefits of this plan allow you to change the premium and death benefit amounts without needing a new policy. Also, this policy has an option to skip premium payments or even lower the death benefit of the policy. Lowering the death benefit may make sense if your financial situation changes as you get older. Although it generally costs more, universal life insurance is more appealing than the others because it has this added flexibility.

	Term	Whole	Universal
Death Benefit	✔	✔	✔
Cash Value Guaranteed		✔	✔
Flexible Payments			✔
Low Monthly Cost	✔