Choosing the right life insurance policy means striking a balance between what you’re able to pay today and what you want to leave your loved ones later down the line. And while price is a big factor, there are other important considerations to make when choosing the right policy for you.
1. Policy Type
Life insurance types typically fall into two broad categories: term and whole.
Term Life Insurance
Term life insurance offers coverage during a certain period of time - think five, 10, 15, 20+ years. During this time period, you pay a premium and your beneficiaries will receive a death benefit should you die. If the time period ends (and you do not convert or renew the policy), you stop paying the premium and you are no longer covered by the policy.
Whole Life Insurance
Considered more of an investment, whole life insurance covers you from the day you sign up until you die - there is no end date. Over time, your whole life insurance policy builds a cash value, which you can cash out or use as a loan once it’s reached the date of maturity.
Term life insurance is typically more affordable. For those who are just looking to make sure their children are covered until they go to college, going with a term life policy may be all they need. For others looking to make a serious investment and are able to pay more per month, whole life insurance could be beneficial. As you consider various life insurance policies, deciding which type of policy is right for your unique circumstances should be one of your first deciding factors.
2. Tailored Pricing
Life insurance policy prices will vary greatly, both based on policy type, the provider and your unique circumstances. As you’re comparing prices and shopping around, it’s important to look for a policy that takes into consideration a number of factors - your health, smoking habits, travel history and other habits or indicators. The more in-depth the policy gets, the more tailored it will be to you - meaning you could be getting deeper discounts for healthy lifestyle choices or positive habits. Policies that offer more generic or lenient vetting may make up for it with higher premiums.
Having an affordable policy is important for a number of reasons. The purpose of life insurance is to provide financial security for your loved ones after your passing. That shouldn’t mean, however, that you’re depriving aspects of your financial life today in order to maintain your policy. Find a policy that can fit well within your budget - even when times get tough.
When faced with financial turmoil (job loss, divorce, etc.), a life insurance policy may be one of the first things to go. Keeping it affordable from the start may help avoid this. Additionally, if you cancel or lapse on your policy, you may face an uphill battle getting another one - especially if your health has declined in any way.
4. Option to Convert Policy
Say you hit the final year or two of your term life insurance policy, but you’d like to keep it going. Some term life insurance policies offer a conversion feature, which allows you to convert the policy into a permanent one.
One major advantage of having this feature is that you avoid having to go back to the market place and start your policy search all over again. If it’s been 20 or 30 years since you initially bought your policy, you may have developed health conditions that could make it harder to obtain a new policy.
5. Living Benefits
It’s important to find a life insurance policy that can offer you certain benefits while you’re still living. Some policies allow you to take premiums already paid back out to cover medical expenses, care, cancer treatments, etc.
Remember that any funds you take back out of your policy will lessen the amount your beneficiaries receive. However, this option could save you and your loved ones from financial turmoil in the event you fall ill or become incapacitated.
You want to know your loved ones are going to be well-cared for in the event that you pass away unexpectedly. Taking the extra time now to look at your options and choose something that’s right for you can make a big difference in how your policy benefits you and your family later down the line. If you’re working with an agent or financial advisor, ask them to help you review your options thoroughly.
Click here to schedule a call with a BWC advisor today.
The information presented in this article is obtained from or based on sources believed to be reliable. BWC does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out of errors, omissions or changes or from the use of information presented in this article. The article does not purport to contain all the information that an interested party may desire and, in fact, provides only a limited view. Information presented does not constitute an offer to sell or a solicitation of an offer to buy any security.
All investments involve risk, including loss of principal invested. Past Performance does not guarantee future performance. Individual client accounts and performance vary. BWC does not provide tax advice.
About Beirne Wealth Consulting Services, LLC – www.beirnewealth.com
Beirne Wealth Consulting Services, LLC (“BWC”) is a privately owned, SEC Registered Investment Advisor with offices in Connecticut and Pennsylvania. BWC provides independent, fee-based investment management services and customized financial planning solutions. Our institutional business provides consulting expertise to defined benefit and defined contribution plans, endowments, foundations and non-profit organizations. Our private clients include high net-worth individuals and prominent families, many of whom bring complex wealth management challenges and multigenerational planning needs. For more information, please visit www.beirnewealth.com or give us a call today at 888-231-6372.
*Registration does not imply a level of skill or training.
© 2020 Beirne Wealth Consulting Services, LLC (BWC). All rights reserved. Reproduction or Use without permission is prohibited.