Different Types of Life Insurance and When You Should Buy Them
Emily Sperry October 09, 2019
There are a few different types of life insurance available, depending on what stage of life you’re in. It’s commonly accepted that you should buy whole life insurance products when you’re young and healthy and buy term life insurance to supplement your need for coverage. But there are other policies available to suit your needs. As always, feel free to contact us with life insurance questions or to speak with a licensed insurance agent.
Common types of Life Insurance
- Whole Life Insurance
- Term Life Insurance
- Funeral Expense Life Insurance
- Mortgage Life Insurance
Permanent or Whole Life Insurance
There are a few types of whole life insurance. As long as you keep paying the premium, these policies are all permanent and will last your whole life. The premium will also not go up over time, it will be the same cost every year for the rest of your life!
- The real value of whole life insurance policies is that they build a cash value over time. They are definitely a long term investment. When you make your insurance premium payment, the insurer invests some of the money and it will gain interest over time.
- The best time to buy these kinds of policies is when you’re young and healthy. You will pay a lower premium, and eventually, you will have a big chunk of cash saved up. Later in life, you can choose to cash out the policy (for retirement, a down payment on a home, etc).
- With whole life insurance you get a choice: cash it out after many years, or allow the company to pay your beneficiary upon your death.
Juvenile life insurance policies, such as Gerber’s Grow Up Plan are a great investment you can make on behalf of the little ones in your life. They only cost a few dollars a month and build cash value over time. As a long term investment, it could potentially be your child’s first down payment on home years from now.
Term Life Insurance
- Term means time. Term insurance policies will protect you for a set amount of time. There is no cash value: you can never cash these policies in.
- They are generally much more affordable but the insurance company is not going to invest this money on your behalf. Term life insurance policies are a great way to increase your coverage, just not permanently.
- The ideal time to buy these policies is when you have young children to raise or a mortgage you don’t want to leave for your family.
- Term life insurance policies expire at the end of the term. You can always get another policy and re-enter a contract but your cost will go up every time as you get older. They are great for people of any age and especially affordable for working families who want the security of leaving a big chunk of cash for the kids.
- There is no law that says you can’t have more than one type of policy. Many people have both whole life and term life policies at the same time.
Mortgage Policies are a type of term life insurance. They are written only to pay off the mortgage, and many banks require them now. No money will go to your beneficiary. Every cent will be used to pay off your mortgage. The value of these policies diminishes over time. If you have a 30-year mortgage and owe $200,000, during year 1 of the policy it will pay the full $200,000. Going forward, it will only pay whatever debt is left on your note. Obviously you only need this insurance when you buy real estate but there may be more cost-effective options out there.
Funeral Life Insurance
It comes by many names:
- Funeral Insurance
- Preneed Insurance
- Burial Insurance
- Cremation Insurance
These are small whole life policies designed just to cover your final expenses. They can be written for specific amounts and usually name your chosen funeral home as a beneficiary. They are interest-bearing policies that grow cash value, some insurers require that you assign another beneficiary (like a relative or someone you trust) to get any extra interest the policy earns when you pass on. Any time of life is a good time to sort out your funeral expenses.
If you are searching for the right life insurance policy, look no further than insureyourhome.com. Call us today to speak with one of our insurance specialists!