Once you’re married or have a family, life insurance becomes a necessity. Unfortunately, we hear stories all to often of people not planning appropriately and then something happens. Most recently, I’ve been seeing a lot of Gofundme pages pop-up asking for help with burial expenses, mortgages, medical payments and more. I know I for one, never would want to place my wife and children in that position.
As a spouse or a parent, you have a responsibility to ensure the future security of your family should something happen to you. One thing people tend to forget is insurance for a spouse that stays home and cares for the children. What does that expense look like should something happen to them?
But what type of life insurance is best for you? The amount of coverage you’ll want depends on you and your situation. Before you decide on a policy, it’s important to familiarize yourself with the two main types of life insurance: term and permanent life.
Term Life Insurance
Term insurance is the simpler of the two main categories, it’s also the most popular form of life insurance, mainly because it’s so affordable. These policies only pay out if the insured dies during the set term of the policy, and typically no other benefits are offered. Terms are typically set anywhere from one to 30 years in duration. So, for example, if you purchased a term life insurance policy lasting 10 years, that policy would only come into effect if you died in the next 10 years. Nothing else is provided. There are two slightly different versions of term life insurance:
- Level Term – death benefit (payout) remains the same over the length of the policy
- Decreasing Term – death benefit (payout) decreases, typically in one-year increments, over the length of the policy
Permanent Life Insurance
Permanent life policies, sometimes called whole life insurance, pay out a death benefit whenever the insured dies, not just within a specific time frame. Permanent Life solutions cost more because the policies have a “cash value” component. This value is tax-deferred and can slowly grow as you hold your policy. Cash value on policies like this can grow to the point where you can take out loans against the policy. There are three main types of permanent life policies, though each of these have variants.
- Whole Life Insurance – These policies offer both a death benefit and a cash value. They don’t expire, your payments stay at the same price, and as long as you pay the policy stays active and is guaranteed. These policies do tend to be expensive, however.
- Universal Life Insurance – These policies guarantee a specific death benefit with set payments. You can typically choose the age to which you’d like to have a guaranteed death benefit. The cash value offered by these policies can be used to alter your premium payments if you have enough saved up.
- Variable Life Insurance – These policies provide both a death benefit and a savings account with cash value that can be invested in stocks, bonds, or mutual funds. The value of these policies can grow quickly, but if investments don’t perform well, your cash value and overall death benefit may decrease. These policies have more risk, but could also have a high reward.
Each of the policy types outlined have variations available, and will differ from company to company. While we specialize mainly in Term Insurance, we do have a network of referral partners who we can refer you to if you’d like to investigate further into Permanent Life. Let us know below and we’ll be in touch.
Consultant | Personal Insurance
Joe Powers is a Consultant in Personal Insurance at RogersGray Insurance. As a Consultant he specializes in auto, homeowners, renters, umbrella, marine, flood, inland marine and life insurance. Joe currently serves on the Board of Directors for South Shore Young Professionals and Plymouth 400. Joe resides in the Plymouth area with his wife and their children. You can connect with Joe on LinkedIn, Facebook or by email.