Hello folks! Thanks for stopping by The Green Swan. I have talked a handful of times about life insurance in prior posts. Just last week actually, I mentioned how researching life insurance led me to the Financial Independence Retire Early (FIRE) movement. Buying life insurance can be a difficult decision, but also a very important one. It’s best to do your research into all the various types of life insurance, but it doesn’t have to be complicated.
After doing my own research, I ultimately decided against purchasing a term life insurance policy. If tragically my wife, myself or both of us were to pass, we have enough saved up that surviving family members would be just fine. What’s right for me may not be right for you though. So definitely do some research and make a decision that you’re comfortable with.
Today I have a contributed post for you from Jeremy who goes through the various life insurance options. I learned something new from reading it and I hope you find some takeaways too. Without further ado…
Shopping for life insurance can be confusing. While it might seem simple, when you start looking, you’ll realize there are a handful of different options to choose from. Each kind of life insurance has different coverage limits, lengths of protection, and additional benefits.
How do you know which one is best for you? Before you can make a choice, you need to compare all of the plans.
Term Life Insurance
Let’s start with the most popular choice, term life insurance. Term plans are temporary coverage. You buy one of these plans for any length of time, anywhere from one year to 30 years. The beauty of these plans is you customize them for the length of your life insurance needs.
You don’t need to buy a plan for 30 years if you only need 10 years of protection. Why pay for additional life insurance your family doesn’t need?
Another reason term plans are so popular is because of the price. Term plans tend to be much cheaper than other choices.
Whole Life Insurance
Maybe you don’t want to lose coverage. Term plans are temporary coverage, while whole life insurance plans are permanent.
These plans never expire. Keep paying the life insurance rates and you’ll have life insurance coverage until you hit their maximum age. Most companies will protect you until you hit 90 or older.
The main disadvantage of a whole life plan is the price. They are going to be much more expensive. If you want the most bang for your buck, permanent coverage is not the choice.
One of the additional benefits of whole life insurance is the cash value component of these policies. Every portion of premiums you pay goes to the cash value in the plan. The longer you have it, the more value.
This value can pay the premiums or be borrowed against in the future. It’s a nice component to have, but the extra benefit comes at a cost.
No Exam Life Insurance
The biggest part of the life insurance process is the medical exam. During this part, the insurance company sends a nurse or paramedic to your home to take some basic health information.
No exam plans skip this part. They will still look at your health records, prescription records, and driving records. Your health is still going to impact how much you pay.
The advantage of these policies is how quickly you can get coverage. Without the medical exam, the whole process goes much faster. Instead of having to wait two months to get life insurance, you can get life insurance in days.
With some no exam companies, you can get life insurance even faster. Companies like Haven Life have sped up the process and made it drastically quicker. If you’re a healthy applicant, you can get life insurance through Haven Life quicker than any other company.
Guaranteed issue policies are similar to a no exam plan, but they don’t look at your records. Nobody is rejected for these plans.
All you have to do is provide them with the basic information, like your age and your gender. After you’ve given them this info, then you have insurance coverage.
The problem with these plans is the price and the coverage limit. These plans are designed for the average policyholder who needs $500,000 or more worth of coverage. The vast majority of companies will allow only sell you $30,000 in guaranteed coverage.
The last type of plan we are going to explore is burial insurance. These plans are the smallest of all of them. They are designed for burial fees, exactly what you would expect by the name.
Most companies cap their burial insurance plans at $15,000 worth of coverage. This should give your family the money they need to pay for your funeral and related expenses.
Deciding Which is Best for You
These are only 5 of the various types of life insurance out there. There are still several others which were not covered. You might be overwhelmed by all of the choices, but life insurance is one of the most beneficial investments you’ll ever make.
Don’t buy a plan just because you have a friend or family member who is an insurance agent. Spend the time to do the research and gather enough information to make an educated choice.