We are here to help you find a life insurance plan that is right for you, whether this is your first time applying for life insurance, you’re retiring, or you’ve changed careers and no longer have coverage through your employer. Life insurance is a crucial financial tool that provides peace of mind and security for your loved ones in the event of your untimely passing. There are several types of life insurance policies available, each designed to cater to diverse needs and circumstances. Let’s learn more about it.
Different Types of Life Insurance Policies
In a time of great hardship and emotional trauma, having a policy and a broker you trust can be truly priceless. Life insurance provides a financial payout to your beneficiaries at the time of your death. This can help cover expenses they may not otherwise be able to afford. There are generally two options for the term of your policy, Term and Permanent Life insurance.
Permanent life insurance encompasses various subtypes, including whole and universal life insurance.
Term Life Insurance Explained
Term life insurance is one of the most straightforward and affordable options available. It offers coverage for a specific term, typically ranging from 10 to 30 years, during which beneficiaries will receive a death benefit if the insured passes away within the policy’s duration. If the insured survives the term, the policy expires, and there is no payout.
Permanent Life Insurance Explained
Permanent life insurance, sometimes known as whole life insurance, is a type of life insurance that provides coverage for the insured’s entire lifetime, as long as the premiums are paid. These policies have both a death benefit and a cash value component. A portion of your premium payments goes toward building cash value, which grows over time and can be accessed through loans or withdrawals during your lifetime.
Universal Life Insurance Explained
Universal life insurance is another type of permanent life insurance that offers more flexibility than whole life insurance. It combines a death benefit with a cash value component, similar to whole life insurance, but allows policyholders to adjust their premium payments and death benefits throughout the policy’s life.
Key Factors to Consider When Choosing a Life Insurance Policy
Selecting the right life insurance policy is a critical decision that requires thoughtful consideration. Here are some key factors to keep in mind:
Financial Needs: Assess your financial obligations, such as mortgage payments, outstanding debts, education expenses for children, and future income replacement needs. Choose a policy that adequately covers these financial responsibilities.
Affordability: Evaluate your budget and choose a policy with premiums that you can comfortably afford throughout the policy’s life.
Policy Duration: Determine how long you need coverage. If you only require coverage for a specific period, term life insurance might be more suitable. If you want lifetime coverage and a cash value component, consider permanent life insurance.
Cash Value Component: If building cash value is important to you for financial planning purposes, consider a whole life or universal life insurance policy.
Health and Age: Your health and age play a significant role in determining premium costs. Generally, the younger and healthier you are, the lower your premiums will be.
Rider Options: Check if the insurer offers additional riders or endorsements that can enhance your policy, such as critical illness coverage or a disability rider.
How to Calculate the Total Benefit You’ll Need.
To determine your total life insurance benefit needs, use the DIME method:
(D) – Debt, (I) – Income, (M) – Mortgage, (E) – Education
These are the financial obligations you’ll want to make sure are covered to ensure you are keeping your family’s future secure.
Here is a relatively easy formula you can work with to sort out the level of coverage you may want for a Term life insurance policy:
Total your assets (income and liquid)
Subtract your debts (mortgage, creditors, education etc.)
= Recommended life insurance benefit
The average person should plan for approximately 10x their annual income.
While it isn’t always pleasant to think about, life insurance can provide financial security for your loved ones or your business in the case of unexpected loss. The financial payout provided by a life insurance plan can cover expenses for funerary arrangements, outstanding debts, future living expenses, legacy planning and beyond. Give the VLG Broker team a call, we are here to help you find a life insurance plan that is right for you, whether this is your first time applying for life insurance, you’re retiring or you’ve changed careers and no longer have coverage through your employer.