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What Type of Life Insurance Do I Need?

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There are several different categories of life insurance; they are term life insurance, whole life insurance, universal life insurance, and second to die life insurance. When deciding which type of life insurance is best for you, first consider the following things: what type of death benefit are you looking for, what type of premiums are you wanting to pay, what kind of cash value will suit you and your family, and what duration of coverage is best suited to your needs and the needs of your family. Once those issues have been considered and decided on you can make a better choice as to which type of insurance will better suit your needs. The next step in the process involves getting an understanding for the differences between the types of life insurance policies there are in order to choose which is best for you. Below you will find explanations of each type of life insurance:

• Term Life Insurance: Term life insurance policies provide death protection for a stated period of time which is where the name term comes in. Term life insurance is perhaps the simplest form of insurance. It provides temporary life insurance coverage for a smaller premium and is great for those who have short-term goals like paying off a loan or individuals who need extra coverage while their children are young. Most states allow term life policies to be bought in 5, 10, 20, and 30 year policies with level premiums. Most policies can be renewed for higher premiums until the age stated in the policy which is usually between 85 and 95. Aside from being affordable in terms of premiums term life policies also have adjustable premiums which mean that premiums can be raised or lowered at certain times to reflect certain changes and expenses all of which are stated in the policy. Premiums can never be raised above the price quoted in the policy. Most term life polices can also be converted into whole life policies as well.
• Whole Life Insurance: Also known as permanent life insurance this type of policy offers coverage for life. Whole life policies are usually best for those individuals with long term goals. The premiums involved with whole life policies are generally level and they are payable for life which means that the younger a policy holder is when he buys the insurance the lower their annual premiums will be. The policies can also earn dividends although there is no guarantee the policy will actually have any to return to the policyholder. Dividends are the result of actual life insurance costs being lower than the projected sum when the premiums were being set. Whole life policies also offer cash value which means that as long as the policy is enforced you are able to borrow money from the policy or if the policy holder sells the policy the money will be available to them. The amount of money will vary from each policy and is based on criteria such as the type of whole life policy, the size of the policy, and the time it has been held.
• Universal Life Insurance: A universal life policy allows the policyholder certain flexibilities to adjust the amount of life insurance they have based on their specific insurance needs at different stages of their life. A benefit of a universal life policy includes flexible premiums which are subject to certain limitations and allow the policyholder to assess the amount of insurance they need and decrease it or increase the death benefit.
• Second to Die Life Insurance: Second to die policies insure two people as policyholders. With these policies no death benefit is paid until both policyholders have died. These types of policies are for larger estates, usually those $1,000,000 and over and protect heirs of estates by withholding policy funds until both spouses have died in order to pay estate taxes because in most cases federal estate taxes are not paid until the second spouse dies.

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