Types of Life Insurance Policies
You know you need a Massachusetts life insurance policy. The idea of leaving your family with bills they can’t afford, funeral expenses, and the cost of higher education in the event of your death stresses you out. Taking care of the ones you love most is a top priority. But deciding which type of life insurance policy is right for you can be overwhelming.
The best option is to sit down with an independent insurance agent to discuss your goals, look at what you can reasonably afford, and ask any questions you may have. Before you do that, take a look at the different kinds of life insurance available, so you have a better understanding of what’s out there.
Term life insurance is one of the most common types of life insurance, and a very popular choice. You choose the amount you want your family to receive upon your death, and you pay monthly premiums for the term of the insurance policy. The policies are often 15 and 20 years, but you may be able to choose a 30 year-term. At the end of the policy term, you can continue to pay or you can purchase a new policy.
With term life insurance, your premiums are often very affordable when you’re young and relatively healthy. As you age, the premiums will increase.
Another type of policy you may have heard about is whole life insurance. Think of whole life insurance as an investment. Instead of a term life insurance policy, which is only good for a pre-determined number of years, a whole life policy will remain in force for as long as you keep paying for it – and the total amount may grow over time.
The premiums are steady throughout the life of the policy. You can also borrow against your life insurance policy if you need it. The growth of the policy is tax free unless you withdraw from the amount you have. The premiums may start out higher than a term life policy, but depending on how long you have it, the growth may be worth the extra premium.
This coverage is also known as a flexible premium life insurance policy or a universal policy. It’s a variation of a whole life policy. The ultimate payout to your beneficiaries is guaranteed, as with a whole life policy. An adjustable policy means you can adjust the premiums, cash value, and even the amount of the policy during your contract term. If you can’t afford the payments you have, adjust them down. If you want to make your policy grow a little faster, adjust it up.
A variable life insurance policy combines the structure and savings of a whole life policy but uses investment funds to help the policy grow. Because of the investment funds aspect, the cash value of your life insurance policy and the payout amount upon your death can fluctuate up or down. The structure of these policies means that your premium payment is used for two things: a reserve account for the insurance company and a separate account with different investment funds. This separate account and it’s growth (or lack of growth) is what determines the value of your individual policy.
Unless you’re really interested in life insurance policies, you may not have heard of the variable universal option. It combines the variable life insurance policy with the adjustable life insurance policy. The amount of your benefits and the cash value will fluctuate based on how well the investment funds perform, but you can adjust your premiums, death benefits, and the selection of investment funds, as well. The final death benefits can and will fluctuate throughout the life of the policy, and like the variable life insurance policy, the benefits paid are not guaranteed.
Do you need term, whole, variable, universal, or some combination? The best way to figure it out is to sit down with an independent insurance agent who can explain your options and give you choices. Contact us today to protect your family from whatever the future holds.