Should you buy term or cash value life insurance?

When it comes to life insurance, there are a dizzying number of choices? Should you buy term, whole life, universal life, indexed universal life, variable universal life, final expense life insurance … the list is long and complex. And the answer is … drum roll … it depends.

Term Life Insurance

If you just want to cover final expenses and pay off debt, term life will give you the most benefit at the most affordable premiums. But term life plans have an end date (unless you select a term plan that can convert to a whole plan). This means if you outlive your term plan, you will be left with no insurance. Of course, you might buy another term plan at that point, but it will be at a much higher premium rate, based on your advanced age. In contrast, whole life provides coverage for (you guessed it) your whole life. It pays your life benefit no matter when you die, as long as you keep paying your bill of course.

Whole Life Insurance

Whole life has another important benefit. It includes a savings component that pays a fixed interest rate that builds cash value over time. The nice thing about a whole life plan is that you can choose to withdraw a portion of our cash value as a loan. You’re essentially borrowing money from yourself. You can pay back the loan with interest, or if you die before the loan is repaid, the loan amount and interest will be deducted from the payout amount to your beneficiaries.

Universal Life Insurance

Universal life is a type of permanent life insurance. It is sometimes called adjustable life insurance because it offers more flexibility than a whole life policy. Unlike a whole life plan, a universal life policy’s cash value is not fixed. You will have a guaranteed minimum interest rate, but this can vary over time based on market conditions. Another way a universal life plan is different is that you cash value can grow and result in a zero-cost policy in which all premiums are paid from the cash value you’ve built.

This brings us to variable life insurance which pays a fixed face value death benefit, but more choices related to your cash value. It can rise or fall based on your monthly payments (which can vary) and the performance of the investments you choose. The greater range of investment options means you could build greater cash value for your beneficiaries. But it also opens you up to higher risk and fees than whole or universal policies.

Indexed Universal Life Insurance

Indexed universal life policies are growing in popularity because your cash value account can earn interest based on a stock market index you choose, such as the S&P 500 or the Nasdaq Composite. The advantage is that you may receive a higher return on your cash value savings as the stock market goes up during the year (to a set cap percentage), but you do not have the risk of losing your value when it goes down due to the plan’s floor.

Indexed Universal Life insurance also allows your cash value to grow tax deferred. Similar to a ROTH IRA, you can pull money out of your policy without paying taxes.

Do you need life insurance at all? Suze Orman, financial guru, has a simple answer: If you have someone else you love that depends on your income, you should seriously consider buying some type of life insurance.

That’s a quick overview of life insurance and Insureous Health Solutions is standing by to help you narrow down the multiple options. Call 904-295-8498 or use this form.