Understanding Your Life Insurance Options
“Term Life Insurance”, “Return of Premium Life Insurance”,
“Universal Life Insurance”– the choices can be confusing...
especially if you’re just an average consumer looking to make smart
decisions about protecting your family’s future. Although a good customer-service-focused
agent can help you understand many of the more subtle differences between
different policy types, knowing the basics about various insurance categories
can help you to identify the most appropriate kind of policy and coverage
for your individual situation.
Term Life Insurance
As the name suggests, term life insurance provides coverage for a specified
time period (referred to as a “term”). If the insured dies within
the defined period of coverage (e.g., 10, 15, 20, 30 years) and the policy
payments are up to date, then a death benefit is paid to the beneficiaries
named on the policy. Term life insurance is often the most inexpensive life
insurance option. Plus, with “Level Term Policies”, premium payments
are guaranteed to stay the same throughout the term of the policy. Term life
can be an excellent choice in cases where estate creation is needed to protect
those who depend upon you in the event of your premature death (e.g., to provide
for children until they graduate from college and become financially independent,
to pay off a home mortgage, etc.). The disadvantages of term life insurance
are that it does not build any cash value and that, unless otherwise specified,
policy owners will need to buy another policy when the first expires. However,
if you need a simple, affordable solution to protecting your family, the cost
benefits of a term life policy may make it the most practical choice. And,
if you’re in good health, you can probably qualify for medically underwritten
term life, which can make premium payments even more affordable. All that’s
required is a free, simple medical exam that verifies your health status.
Return of Premium Term Life Insurance
Although most consumers like the benefits and affordability of term life,
some find the idea of paying for insurance that does not provide any cash
value in the event that the policyholder is still living at the conclusion
of the policy to be a consideration. For consumers who want to retain the
protection benefits that basic term life insurance policies provide, but wish
to be reimbursed for premiums paid if the policyholder is still living when
the policy concludes, some carriers offer a product called “Return of
Premium” term life. This type of policy offers the same guaranteed benefit
periods and level premium payment amounts as term life with one considerable
improvement –policy owners who keep their policies in force can get
back all the money (minus fees, extra charges or policy riders) paid into
the policy premiums when the policy expires at the end of the level premium
period1. It’s a good option for those who don’t have the financial
freedom to pay the large premiums that go along with a highly flexible universal
life policy, but still want to purchase an insurance product with some cash
value.
Universal Life Insurance
One reason that many people find making the right decisions regarding life
insurance a difficult decision is because it’s very hard to guess what
their needs will be 10, 20, or 30 years from now. Enter “Universal Life
Insurance.” Offering more flexibility than term life, Universal Life
policies allow the insured to make changes to the amount of the death benefit
as well as the cost of premium payments for as long as the policy is in force
(usually a policy with no expiration date—so coverage can be retained
throughout your lifetime). Growing families, up-and-coming business owners
and investors often find this type of policy appealing because of the tremendous
amount of flexibility it offers. In fact, many people who have previously
owned a term life product choose to upgrade to a universal life policy when
their term coverage expires. However, like most things, these great features
come at a price. Premium payments are often significantly more expensive than
those associated with a term life policy.
Juvenile Life
Contrary to popular belief, juvenile or child life insurance policies aren’t
only about protecting parents in the event of a child’s death –
they may also be helpful in providing for the child’s future. While
the policy does indeed provide a death benefit in the most unfortunate of
circumstances, juvenile life policies can also potentially build cash value
which can be accessed in the future to help fund a child’s educational
needs, etc. Some parents have found that, should a child develop a medical
condition that makes them difficult to insure later in life, having previous
coverage made it easier to obtain the adult coverage they need. There are
a variety of options regarding coverage and premiums, but generally, youth
and good health allow for very, very affordable premium payments.
Have More Questions?
Your professionally licensed insurance agent is your best resource. At Matrix
Direct, we’ve helped over one million people with their life insurance
needs. We can help you find the right coverage, too. Just visit us online
at www.matrixdirect.com.
¹The cumulative premiums paid on the policy during the
level term period (15, 20 or 30 years), not including any substandard and
rider charges, will be paid to you at the end of the level term period if
the policy is then in force. The premium returned does not take into account
any time value of money. Beginning the sixth (6th) policy year, a portion
of the cumulative premiums will be returned if you choose to surrender the
policy.
