How to Choose the Right Life Insurance Plan

Life insurance can be intimidating. You’re probably overwhelmed by the idea of taking care of your family and loved ones if you were to pass away.

But understanding the different types of life insurance plans and how these policies work will keep you feeling secure. It’s important to stay informed so you can make the right decision for your family and finances.

Keep reading to learn how to choose the right life insurance plan!

What Is Life Insurance?

Before we dive into the different types of plans, it’s important to cover the basics of life insurance. Life insurance is a contract between the policyholder and the insurer.

In this contract, the insurer is guaranteeing payment of a death benefit to the named beneficiaries when the insured person passes.

For the contract to remain, the policyholder will pay a premium upfront or over time. Also, some policies will expire so it’s important to understand the different types.

For example, term life insurance policies will expire after a number of years that’s been defined. But permanent life insurance policies remain active until the insured person dies or stops paying the premiums.

What to Consider Before Choosing a Type of Life Insurance

When evaluating the different types of plans, you should also keep a few factors in mind. Not every policy will be right for you and your situation, so it’s important to evaluate your needs and priorities first.

Ask yourself what role you want your life insurance to play in your general financial plans. This is important if you’re looking for affordable life insurance to help financially support your family in the years when they’ll need it most. In that case, you’re looking for a term life policy.

But if you want coverage throughout your life that will build in value, you should opt for a permanent life insurance policy.

Along with your future needs, ask yourself how much you can afford now. If you’re looking for more coverage for a lower cost, you may want to opt for term life insurance.

Also, consider your current health. If you’re a reasonably healthy person, a medically underwritten policy could be the best and most affordable for you. But if health is a concern, a different type of policy, like accidental death, could be a better option.

What Are the Different Types?

Understanding the different types of life insurance will help you to choose what’s best for you. Below, we’ve outlined a general breakdown of each type before getting into the specifics of some.

Defining Types of Life Insurance

The first type, which we’ve already mentioned a few times above, is term life insurance. This is a policy that will last a certain number of years after the death of the holder and then will end.

Level term means that the premiums you pay will be the same each year. But increasing term is referring to premiums that are lower when you’re younger and increase yearly.

Permanent life insurance, also mentioned above, will remain for the insured’s life unless the policyholder stops paying the premiums. This can be a more expensive option.

Single premium means that the policyholder will pay upfront for the entire cost of the premium.

Whole life insurance means that it will continuously increase in value. This is a type of permanent life insurance.

Universal life insurance is also a type of permanent insurance that has a cash value which will earn interest. With this policy, the death benefit and premiums can change and be adjusted with time.

Guaranteed universal will not build in value but will have lower premiums than whole life. With variable universal life insurance, the policyholder will be able to invest the policy’s value.

Lastly, guaranteed issue insurance is also a type of permanent life insurance that’s available to people with medical issues. This basically insures people who are high risk.

Understanding Term Life Insurance

Now that you know more about each type of life insurance, it’s helpful to give an overview of some of the more popular types. Term life insurance is easy to understand and to buy.

With this type of coverage, your policy will last for a designated period of time. The typical amounts of time are 10, 15, 20 or 30 years. Once the term length is up, the coverage will end, but it can also be renewed.

This is a popular insurance choice since it offers coverage during the years when your family will likely be the most in need. It’s also typically at a reasonable price, depending on the term length and the amount you purchase.

Understanding Medically Unwritten Term Life Insurance

Another popular choice is medically unwritten term life insurance. This will take your age, lifestyle and family health into consideration. You’ll then be determined for eligibility and price that’s been designed for you.

This typically offers more options and can be purchased usually without a medical exam if the person qualifies.

This type of insurance can also be affordable and is particularly helpful for people who are already healthy and want to save money.

Both term life and medically unwritten term life are certainly not the only types of life insurance policies and may not be right for you. Check out more info to better understand which policy will suit your needs.

Evaluating the Types of Life Insurance Plans for You

Choosing the right life insurance plan means understanding the types of life insurance plans that are on the market.

Above, you can read through an overview of each type and dive into a few specifics. Remember to also evaluate your current needs before purchasing any plans.

Keep reading from our blog to get more helpful money-saving tips!

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