Looking for life insurance?
Purchasing a life insurance plan is one of the best ways to secure your family’s well being, providing you with peace of mind along the way.
There’s no shortage of plans promising low premiums and strong benefits, but knowing what all options are out there and which to choose can be challenging.
Read on as I unpack 5 life insurance policies that aren’t term, and see if one of them might be suitable for you.
#1 Whole Life Policy
Here’s the gist of a whole life policy.
You have a life-long guarantee, meaning there are no terms to decide upon.
You pay an unchanging premium, set when you purchase the plan.
And you get a guaranteed interest rate, earning a cash value in addition to your guaranteed death benefit.
If you really want a policy that requires nothing but paying the bills and you care about maintaining a budget, a whole life plan seems practical. You never have to worry about your premiums changing, no matter your age and health.
The downside is that a whole life policy is far more expensive than other plans out there, and you are locked into payments and rates.
While you are earning a cash value, there are alternative investment opportunities worth your while that don’t impact your life insurance.
# 2 Universal Life Policy
Universal life is a type of permanent life insurance policy.
As such, it offers you both a death benefit and cash value and is guaranteed for life.
So far, it sounds exactly like a whole life policy.
So what’s the difference?
Universal life insurance is generally more adaptable and affordable than a whole life policy.
You can often adjust your premiums and potentially change how much of your money goes to the death benefit and how much goes to your cash value.
Two of the most popular universal policies, variable and index, are outlined here.
With variable universal life, professionals manage your cash value funds, and you can place that money into mutual funds, rather than just leaving it to grow at a set interest rate.
The uncertainty is a gamble, but you could earn more in the long run when the market is thriving.
With indexed universal life, your cash value grows based on two factors: a set minimum interest rate and a rate based on the S&P 500 or comparable indexes.
The index policy might limit your earnings with its cap, but also guarantees a minimum rate to protect you from stock market losses.
#3 Survivorship Life Insurance
Also known as second-to-die life insurance, this policy is unique in the life insurance world as a joint policy where the beneficiaries only receive payment after both of the insured have died.
These plans are almost always permanent and can come in the form of a universal, variable, or whole life policy.
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That means survivorship insurance costs more but comes with both a death benefit and cash value, which can amass differently depending on which survivorship policy you choose.
Survivorship policies are typically purchased by married couples looking to leave a legacy for their children and grandchildren, but also by parents leaving behind special needs children who might require care for years to come.
It can also be used to settle taxes on estates.
Couples who have the means to support themselves in the event of one of them passing or who prefer to limit the complications of multiple policies could benefit from a survivorship plan.
Again, it comes down to weighing your family’s unique needs.
If you like the idea of a joint policy but would like your spouse to be able to access its benefits, you might consider a first-to-die plan, which operates similarly but pays out to the spouse left living rather than to secondary beneficiaries.
The policy simply ends at that point, leaving the beneficiary uncovered.
#4 Final Expense Insurance
Whereas the other types of life insurance mentioned on the list are mainly concerned with replacing your income, leaving your family a legacy, or protecting them from the burden of debt, final expense insurance has a smaller and more direct purpose.
Funerals, burial services, headstones, and flowers are quite expensive, with average funerals costing at least $10,000.
Many families struggle to produce that amount of money in the midst of a sudden passing and become burdened with the cost of burying a loved one.
Final expense insurance covers the funeral and other associated end-of-life costs.
That being said, the payout on such a policy usually maxes out around $50,000.
Burial insurance plans can usually be purchased as term or whole life policies.
And fortunately, premiums and requirements on these plans are low, making them an appealing option for seniors looking to cushion their families in the wake of their passing.
#5 Credit Life Insurance
Last but not least, credit life insurance is another plan designed to relieve the insured’s family from overwhelming debt.
The key difference with credit policies is the beneficiary.
Rather than your descendants receiving a death benefit, the money is contributed to your lenders to pay off specific loans.
As your debt decreases, so does the policy amount, with the end goal being zero dollars on each.
If you pay your debt off while living, your policy ends. If not, the policy will pay off the remaining balance on your loan.
Credit policies are usually taken out on home and car loans, and medical exams and age don’t factor in quite as much as they would with say, a term life insurance policy.
Here’s the deal, though.
Since it’s a guaranteed plan, you’re paying higher premiums than you would with other policies, and the actual value of your policy decreases daily.