Which Type of Life Insurance Policy is Right for Me?

Term Life Insurance

One of the most affordable options, term life insurance is ideal for those looking for greater coverage (the monetary value of your policy) for a set period of time. Many terms last for 10 to 30 years, depending on which option you select. Once your term ends, so does your coverage.

Term life insurance may be beneficial for those who have greater coverage needs now that may diminish over time. Maybe your family is growing in size — and you're doubling up on coffee to keep up with them. You might need greater coverage from their first steps to the day they walk across the stage to accept their diplomas.

When your "term" ends, you may have the option to renew your term life policy or choose a more permanent option for coverage, such as whole life insurance. 

Can't decide between term and whole life insurance? There's one type of policy that can potentially offer you multiple beneficial features: Convertible Term Life Insurance. It allows you to purchase a term life policy now with the option to convert it to a permanent (whole life) policy later, without a new medical exam or the need to prove insurability.

Whole Life Insurance

A more permanent option, whole life insurance is designed to provide you with coverage for exactly that — your whole life (as long as premiums are paid). Whole life insurance also allows you to lock-in your premium rate, which means it won't increase as you age or your health status changes. Let's say you purchase a whole life insurance policy during your working years, for example. You'll pay the same rate when you retire as you did when you bought it, which is typically less expensive than it would have been if you waited to buy it later in life.

Whole life insurance policies are typically more expensive than term life insurance policies, however. The reason for that price difference is their permanency, as well as their "cash value." Cash value is accessible money potentially set aside each time you make a payment. You can leave the funds untouched and watch them grow or borrow against the cash value of your policy to cover an emergency. Maybe your car needs a repair or you need dental work done. The money can be used however you'd like, but you do have to pay it back with interest, in order to maintain the full value ("death benefit") of your policy. Cash value is also tax deferred, like an IRA or a 401(k).

Who needs a whole life insurance policy? Anyone who wants guaranteed coverage for the rest of his or her life — at a consistent rate that can be budgeted for each month. The sooner you buy it, the better though, as premium rates tend to be lower when you're young and healthy.

Universal Life Insurance

Similar to whole life insurance, universal life insurance offers coverage for up to a lifetime, or permanent life insurance, as long as premiums are paid. It also offers cash value, which can be borrowed against should the need arise.

What's the difference between universal life insurance and whole life insurance? (We're glad you asked.) It's the ability to adjust the benefit amount to meet your current needs — subject to approval by the life insurance provider — without having to buy an entirely different policy. So, if you like flexibility, it can be beneficial.

A universal life insurance policy can be ideal for those who are young and just starting out. Maybe you're renting your first apartment or you've just landed your first job. It's a smart way to secure up to a lifetime of coverage. If your financial situation changes, you also have the ability to change your life insurance coverage along with it (within the limits outlined in your policy).

Guaranteed Issue Whole Life Insurance

Life insurance isn't just for those who are young and at the peak of their health. There are certain life insurance policies, such as Guaranteed Issue Whole Life Insurance, that allow you to obtain coverage without completing a medical exam or answering a long health questionnaire. If you meet the age requirement (50 to 85 years old), you can't be turned down for any health-related reason. So you can find the coverage you need, without the hassle you don't.

You can also choose how much coverage you need — from $5,000 to $25,000*. Similar to a traditional whole life insurance policy, guaranteed issue whole life insurance offers a locked-in rate that won't increase as you age or if your health status changes. Each time you make a payment, your policy will grow in cash value.

Guaranteed Issue Whole Life Insurance also offers living benefits to those suffering from certain chronic or terminal illnesses, based on the terms outlined in your policy, at no additional cost.

It's an attractive policy for those who meet the age requirement and want to help ensure their loved ones won't have to shoulder the financial responsibility of medical bills, credit card debt, or funeral costs alone.

Accidental Death Insurance

Often it can take weeks to get approved for a life insurance policy. So, if you need coverage fast, you may want to consider another option: Accidental Death and Dismemberment Insurance (AD&D). It offers protection for you and your family if you are seriously injured or killed in an accident. As long as you meet the age requirements, you may be guaranteed approval, regardless of your health or occupation.

It's an attractive option for those who may have had difficulty qualifying for a more traditional life insurance policy, due to a pre-existing medical condition or another factor. Although it's not a life insurance policy, AD&D can provide some level of protection for those who may have otherwise gone without. It's also generally less expensive than a term or whole life insurance policy.