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What type of life insurance is best for you?


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The first question you might face once you decide to explore a life insurance policy is: Permanent life insurance or term life insurance?

As you might imagine, the two types of plans come with different costs, coverages and features. In this article, we’ll explore those different attributes to help you decide which life insurance is right for you.

Term life insurance
Term life insurance is often more straightforward and affordable than permanent life insurance. This type of plan is great for a family with kids in the home, for an individual on a limited budget, or for supplementing another short-term insurance need.

Term life insurance only provides coverage for a specific amount of time, often between 10 and 30 years. It exists solely to provide your beneficiaries with a payout if you pass away during that time, and allows you to purchase only the amount of death benefit coverage you need. Term life insurance doesn’t have any cash value for you to access, and essentially only offers your family or beneficiaries protection in the event of your passing.

Once the coverage term is over, the policy expires and you will have to purchase another one, often with a more expensive premium.

Permanent life insurance
Permanent life insurance offers more flexibility and lifelong protection, although it can come at a greater cost to you.

Like term life, permanent life also pays your beneficiaries in the event of your death, but it additionally acts as an investment vehicle that can grow over time. Permanent life insurance typically costs more because it carries a guaranteed cash value and accumulates tax-deferred money that can be used in a number of ways. That’s why it’s often the best fit for people dealing with estate planning, retirement and complex wealth transfers.

Under the larger umbrella of permanent life insurance plans, there are a number of different sub-categories, including Whole Life, Universal Life, Indexed Universal Life and Variable Universal Life. All of these permanent policies vary based on premium payment amount, stock market factors and investment potential, and each plan has its own pros and cons:

  • Whole Life—A standardized policy that features level premiums, and offers both death benefits and cash-value potential with fixed interest rates. This is often the most expensive type of permanent life insurance policy.
  • Universal Life—A more customizable policy that can adapt to fit your needs, by offering flexible options around the death benefit amount, premium payment amount and investment features. The flexibility of Universal Life is certainly a perk, but the interest rate is typically not as high as other investments.
  • Variable Universal Life—Similar to universal life insurance, this plan can allocate premiums among various investment sub-accounts, which offers the potential for more cash-value accumulation. This plan allows you to choose where your cash value is invested—but investment expenses can be high, and you may have to pay higher premiums to keep your policy in force if your investments lose value.
  • Indexed Universal Life—This policy’s cash value accumulation potential is based on positive changes in one or more stock market indexes, and the earnings are typically protected from downside risk. Although having protection from down-turns in the market is an attractive feature, fees and expenses for these insurance plans are higher than others, and the earning potential is lower than Variable Universal Life, since most policies are subject to caps on returns.

Find your right fit
Both term and permanent life insurance plans can help ease financial pressure for your family in the event of an unexpected death, but only permanent life insurance plans have benefits that can be accessed while you are living.

No matter what type of life insurance you are considering, the experts at First Tech Insurance Services can help you determine which insurance plan will be the best fit for your budget and for each stage of your life. Schedule some time to speak with one of our agents today.