Which Type of Life Insurance is Right for Me?

Posted on September 14, 2020

Life insurance is a versatile financial asset because it:

  • Carries many tax advantages
  • Covers a wide a variety of situations
  • Offers a range of costs

Finding the perfect insurance solution takes careful consideration, and our wealth advisors are experts in understanding the many types of life insurance.

Whatever your specific need for life insurance, we can find a suitable solution from one of the three main types: Term, Universal, or Whole. Let’s take a closer look at each type.

Term Insurance

Term life is just as its name implies; you take it out over a certain “term” or period of time, such as 20- or 30-year term. Term life generally provides a high death benefit for a relatively low cost.

Term insurance is usually favored for two purposes:

  • Income replacement
  • Debt security

When you want to protect your family, buying insurance to replace your income is the most common use. If something happens to you, your family will receive your income from the death benefit paid out by the life insurance company.

Protecting against debt is another use of life insurance. For instance, life insurance can secure a mortgage or a business loan.

As a general rule, term insurance is a great fit when you have a defined need that will last for a known period of time and you want to manage costs.

Universal Life Insurance

Universal life policies provide a permanent death benefit with a variety of premium schedules. They often work best when you only want permanent death benefit protection for the lowest cost.

Universal life policies are like other permanent life insurance policies; they offer different funding options, cash accumulation features, and payment flexibility.

Whole Life or Cash Value Life Insurance

These policies build cash value while providing a permanent death benefit, and the cash can be accessed before the insured is deceased.

Whole life, sometimes called cash value, provides permanent death benefit coverage similar to universal life but is usually the most expensive insurance option, mainly because the emphasis is on cash value and other policy features are included.

People generally use whole life as an accumulation asset, not a primary means of life insurance. The idea is that you can fund a cash value life policy which will earn a rate of return on your premiums, and you can later use the cash values as another money source. 

Congress gives favorable tax treatment to this asset, so with the tax benefits and ability to earn returns on the premiums, this type of life insurance policy becomes another cash-building account in your overall financial plan.

Our Bradley Wealth advisors are happy to help you determine the perfect life insurance solution for your specific needs, whether simple or complex. Our risk management team is standing by to help!

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