As you start buying an individual life insurance policy, you’ll quickly find that you have many different options to choose from. These choices can quickly become overwhelming, causing you to wonder which approach is suitable for your family’s needs and which policy will leave your family protected if the worst-case scenario happens.
This article will break down the core differences to help steer your search for a life insurance policy in the right direction.
Types of Life Insurance Policies
There are three primary life insurance policies to choose from — term life, final expense, and permanent life.
Term Life Insurance
Term life insurance provides your loved ones financial protection if they rely on your income to support your children. This type of policy is called “term” because it protects your family financially through a term, or period, of life where that additional financial protection is essential. This can include the term between now and when your children leave home or until you retire.
Term life insurance typically covers your family between five and thirty years. Once the term ends, your coverage expires, and you will no longer pay unless you decide to convert that policy to a permanent life insurance policy. You may also choose to purchase a new policy instead.
Final Expense Life Insurance
Final expense life insurance is ideal for older families who simply want to cover burial expenses and end-of-life costs. This life insurance policy is suitable for anyone who wants to avoid unnecessary spending on a policy but still wants to leave their family covered in the event of a loss.
Permanent Life Insurance
Permanent life insurance can cover you for the remainder of your life. It tends to be more expensive because it’s also more expansive in how much it protects you and your family. This life insurance policy can stay with you for as long as you’re alive, growing in value over time. Permanent life insurance policies include whole life insurance or universal life insurance.
Which Life Insurance Policy is Right for You?
There are a few factors to consider as you choose which life insurance policy is best for your family — your budget, your loved one’s needs, and your financial situation. Ask yourself these questions:
- Who relies on your income for financial support?
- How many years would they need your salary to support their lifestyle?
- Do you currently have any retirement savings they would get access to?
- Would you need to cover extra childcare expenses?
- Do you have a mortgage or other high amounts of debt?
- Are there any end-of-life expenses you want to pay for?
Ultimately, you want to consider how long your loved ones would need financial support if you pass away. If you’re a young family, this support would likely need to extend until your children are out of school. If you’re nearing retirement age, the support might need to extend until the age where you plan to retire. If either of these is true for your family situation, a term life insurance policy may be the right fit for you.
If your loved ones need financial support well past your retirement, a permanent life insurance policy might be a better option for you. Although these policies tend to be more expensive, they can cover your loved ones for longer, giving you more peace of mind.
With so many options to choose from, it’s good to speak to an insurance agent about what’s available to you. Request a quote from McGrath Insurance Group to get the process started, so you can stop spinning your wheels with worry about what’s best for your family and start having peace of mind that your loved ones are covered.