Introduction
The cost, advantages, and premiums of numerous types of life insurance vary. Find the insurance plan that is best for you and your loved ones using this advice.
The many kinds of life insurance plans are there to let your loved ones have a safety net in case you die away. The payout from an insurance provides your family with important financial security that may be used to pay expenditures like the mortgage, child care, and other regular expenses. One of the most generous investments you can make is life insurance.
The idea of coverage is straightforward: Just like with auto or health insurance, you pay premium payment fees to your life insurance provider in exchange for the privilege of being insured.
But when it comes to choosing the best policy for your loved ones and your budget, life insurance may get tricky. We’ll go over the many forms of life insurance coverage available so you can decide which might be the best option for your family.
In this guide, we will cover the different types of life insurance policies available to you, including:
- Term life insurance
- Medically underwritten term life insurance
- Simplified issue term life insurance
- Return of premium term life insurance
- Permanent life insurance
- Whole life insurance
- Universal life insurance
- Variable universal life insurance
- Guaranteed issue life insurance
- Accidental death insurance
What to take into account while selecting a type of life insurance policy
Before we delve into the numerous life insurance possibilities, think about these four crucial queries as you weigh your options:
1. What role do you want life insurance to play in your overall financial plans?
A term life insurance policy is a wise choice if you’re seeking for reasonably priced insurance protection to assist in providing for your family’s financial needs during the years they need it most. A permanent life insurance package can be a better choice if you’re searching for lifelong protection that accrues monetary value over time.
2. How much can you afford?
When compared to permanent life insurance, which can cost anywhere between 5 and 20 times more than a term life policy, term life insurance enables buyers to obtain better levels of coverage for a substantially cheaper price.
3. How is your health?
A medically underwritten coverage will frequently be the more economical choice if you’re in generally good health. Other choices, including assured issue or accidental death plans (which we shall cover below), might be a better fit if health is a concern.
4. Is a digital purchasing option important to you?
Some people might find it strange to purchase life insurance products online. But if you have the correct tools, selecting a coverage quantity, obtaining a sample quote, and applying for coverage online can be easy. If you’re accepted, you could even be able to begin coverage right away.
Learn about term life insurance
This kind of insurance is straightforward to comprehend, apply for, and purchase. Term life insurance offers dependable protection at a reasonable cost. Term insurance, as the name suggests, covers you for a set amount of time, usually 10, 15, 20, 25 or 30 years. The coverage expires at the end of the term, or you can renew it at a greater cost.
Why are term life insurance policies so popular? because it provides coverage at an affordable price during the years when your family most needs it. It may provide financial security up until the mortgage is paid off, your partner retires, or your children move out of the house, depending on your term length and the amount of coverage you buy.
A life insurance calculator online removes the guesswork if you need assistance determining the appropriate level of coverage and term duration for you.
If you think term life insurance could be the best option for you, there are a few different types you should be aware of.
Medically underwritten term life insurance
The most economical types of coverage are frequently medically underwritten life insurance policies. These insurance assess eligibility and price specifically for you based on your age, lifestyle preferences, and personal and family health history. A wider range of coverage possibilities, ranging from about $100,000 to several million dollars, are also available with medically underwritten insurance.
A select group of applicants who qualify can obtain some medically underwritten plans, like as the Haven Term insurance, without having to undergo a medical exam because to advances in underwriting. If a consumer is eligible to forgo the medical exam or not after submitting an application, they will be informed right away. (Remember that being truthful during the application process is always crucial. The answers you provide on the application and your sincerity may be a determining factor in the issue of the insurance or payment of benefits.)
Term life insurance that is medically underwritten is typically rather reasonable. Here are some illustrations of Haven Term policies that were written by MassMutual or its affiliate, C.M. Life.
Quotes for term life insurance
| AGE | GENDER | HEALTH | FACE AMOUNT | TERM LENGTH | MONTHLY PREMIUM |
|---|---|---|---|---|---|
| 30 | Male | Good | $250,000 | 30 | $23.92 |
| Female | Good | $300,000 | 30 | $24.28 | |
| Male | Excellent | $500,000 | 30 | $29.99 | |
| Female | Excellent | $1,000,000 | 30 | $43.41 | |
| 35 | Male | Good | $250,000 | 20 | $16.86 |
| Female | Good | $300,000 | 20 | $17.15 | |
| Male | Excellent | $500,000 | 20 | $20.72 | |
| Female | Excellent | $750,000 | 20 | $23.13 | |
| 40 | Male | Good | $250,000 | 10 | $15.40 |
| Female | Good | $400,000 | 10 | $18.42 | |
| Male | Excellent | $600,000 | 10 | $18.98 | |
| Female | Excellent | $800,000 | 10 | $20.89 |
Estimate based on pricing for eligible Haven Term applicants in excellent health. Pricing differences will vary based on ages, health status, coverage amount and term length. These prices do not reflect the rates for applicants in DE, FL, ND, NY and SD.Who term life insurance may be a good fit for
Term life insurance that is medically underwritten, such as the Haven Term policy, is simple to understand, simple to purchase, and offers dependable coverage for a reasonable cost. If cost is your primary issue and you don’t mind having a medical exam, if necessary, this is an excellent choice. If you no longer wanted to be involved in the family’s life, you may apply for a policy with a face value of at least $500,000 to assist safeguard them. Who knows, maybe you’ll be among the fortunate ones who is able to forgo the medical examination.
Simplified issue life insurance
In the underwriting process for simplified issue plans, applicants are often asked to complete a brief questionnaire containing a few health-related questions. To apply and receive a coverage determination, there is no requirement for a medical exam.
These plans are typically more expensive than those that are medically underwritten because there isn’t a medical exam and the insurer doesn’t have as much information about you. Why? In general, the more information an insurer has about you, the less expensive your coverage may be.
Additionally, with simplified issue policies, maximum coverage amounts are sometimes limited to $500,000 or less. Here are some examples of the cost of coverage for a Haven Simple policy, issued by C.M. Life Insurance Co., a MassMutual subsidiary. Quotes shown are for nonsmokers in excellent health.
Quotes for 100% no medical exam term life insurance
| AGE | GENDER | FACE AMOUNT | TERM LENGTH | MONTHLY PREMIUM |
|---|---|---|---|---|
| 25 | Male | $200,000 | 20 | $14.46 |
| Female | $400,000 | 20 | $19.77 | |
| 30 | Male | $100,000 | 20 | $9.70 |
| Female | $500,000 | 20 | $22.60 | |
| 35 | Male | $200,000 | 15 | $14.28 |
| Female | $300,000 | 15 | $14.66 | |
| 40 | Male | $200,000 | 10 | $20.05 |
| Female | $400,000 | 10 | $21.64 |
Estimate based on pricing for eligible Haven Simple applicants in excellent health. Pricing differences will vary based on ages, health status, coverage amount and term length. These prices do not reflect the rates for applicants in DE, FL, ND, NY and SD.Who Simplified issue life insurance may be a good fit for
For those who are certain they will never take a medical test or who may want a lower level of coverage, simplified issue life insurance, such as a Haven Simple policy, may be a viable choice. It’s vital to remember that the decision to issue the insurance or to pay its benefits is based on your honesty and ability to be insured as determined by your responses to the application’s health questions.
Return of premium life insurance
The concern that you are paying premiums for a hypothetical situation is one of the main objections individuals have to term life insurance. You also virtually always wish that the what-if scenario won’t materialize.
Where do all those premiums end up after that? The majority of the time, the response is that the life insurance company retains your premiums in order to fulfill claims obligations to heirs of policyholders who pass away during the policy’s term. The policy for return of premiums is a notable exception.
If you outlast the term of your policy, a return of premium policy, which in some situations can also be an optional rider that’s either available for a cost or is included as part of a term insurance policy, reimburses your insurance premium payments. For instance, if you bought a 30-year term life insurance policy and lived longer than the term of the policy, you would typically be compensated for most or all of your premium payments. Yes, you’re getting a lot of money back, but the return of premium riders frequently increases the cost of your premium payment for this service.
Additionally, you typically cannot recover the premiums you had paid if the return of premium policy lapses before the term is up owing to cancellation or nonpayment of premiums. It only functions at the conclusion of the policy’s coverage period.
Who Return of premium life insurance may be a good fit for
If you want term insurance and a mechanism to get your money back if the policy’s coverage period is exceeded, a return of premium policy can be a good option.
Accidental death insurance
Even though accidental death insurance, also referred to as accidental death and dismemberment insurance or AD&D insurance, is not technically term or permanent life insurance, we have included it in the section on term life insurance since the term length is typically linked to how long the coverage will last. If you were killed in an accident, such as a vehicle accident, occupational injury, or homicide, an AD&D policy would pay out a lump payment to your surviving family members. If the policyholder sustains serious injuries, becomes paralyzed, or loses a limb, the dismemberment coverage portion of the policy may offer some form of living benefit, though not all accidental death policies do.
Additionally, these kinds of insurance policies don’t cover any kind of illness-related death, including cancer, heart disease, or stroke, some of the most common causes of death in our 40s and beyond. You should read the fine print since the restrictions on when a death benefit is given can put your family in financial danger. It’s also crucial to remember that the typical coverage limit for many accidental death insurance policies is $500,000.
Who Accidental death insurance may be a good fit for
An accidental death policy may be a good option if you have been declined term life insurance due to health reasons because it is not medically underwritten.
All about permanent life insurance
Permanent life insurance can be the best option for you if you want a life insurance coverage that covers the rest of your days. Permanent life insurance includes a variety of life insurance products. Whole life and universal life are the most popular. In contrast to term insurance, permanent insurance offers lifetime protection and has a cash value component that fluctuates in size.
Permanent policies can cost anywhere between 5 and 20 times more than term life insurance due to the characteristics of this type of life insurance. Permanent insurance may be more expensive for families on a tight budget because to the substantial variation in premium expenses.
A portion of the money you spend on permanent life insurance maintains your protection, just like it would with a term policy. Additionally, with some permanent insurance policies, a portion of your payment funds a cash-value feature.
As you pay your premiums each year, this cash value component might increase, making your insurance more valuable over time. The policyholder may borrow against their cash value or partially surrender it for a lump amount to access it for any purpose, including financial emergencies or to augment retirement income.
Nevertheless, you should be aware that accessing cash values through borrowing or partial surrenders may lower the policy’s cash value and death benefit, increase the likelihood that the policy will lapse, and could result in a tax obligation if the policy expires before the covered person.
Before purchasing a whole life insurance policy, we advise you to speak with a financial advisor because permanent life insurance products can have long-term effects on your financial objectives. Our parent business, MassMutual, has representatives who would be happy to assist you if you are curious about the advantages of this kind of coverage.
Permanent life insurance policies come in several varieties with distinctions that are important since they will directly impact your premiums, coverage, and the overall complexity of managing the product.
Whole life insurance well explained
One of the most common permanent policy types for life insurance is whole life insurance. It has a fixed coverage amount and level premium for the duration of the policy. Whole life insurance has the potential to build cash value over time, just like all permanent plans.
The majority of whole life policies call for a medical exam, which means your insurance provider will inquire about your health, the health history of your family, as well as your lifestyle and employment decisions, in order to determine your eligibility and cost, and you’ll be required to undergo a medical examination. When compared to term insurance, whole life insurance can be significantly more expensive. Naturally, if you want to keep paying for a term policy after it expires, you would be faced with much higher premiums.
Who Whole life insurance may be a good fit for
If you want coverage that lasts a lifetime and won’t end before you pass away as long as the premiums are paid, this kind of whole life insurance can be a smart choice. Additionally, the cash value component of this kind of policy can be used to boost your retirement income.
Universal life insurance
Universal life insurance offers perpetual protection and builds cash value over time, just like a whole life policy. However, a crucial aspect that sets universal coverage apart is the availability of adjustable rates that may let you change the amount you pay year. The policy’s minimum monthly insurance cost must be paid, either through premium payments or account balance increases, in order to maintain coverage.
A universal policy’s cash value accrues interest at the higher of the insurance company’s announced current rate or the policy’s minimum interest rate. As a result, the cash value has a lower potential for growth than in a variable universal life insurance policy, which is covered in more detail below, where the cash value is invested in the stock market. However, due to the policy’s minimum interest rate, there may be better security.
Because universal life insurance offers flexible premiums as opposed to whole life insurance, which has fixed premiums for the duration of the policy, policyholders must be informed of the costs associated with the policy. If there is sufficient cash worth, policyholders might be able to utilize it to cover their monthly insurance premiums. On the other side, if policyholders have missed paying their premiums in prior years, they may also be required to pay more than their usual rate.
Who Universal life insurance may be a good fit for
The main benefit of universal life insurance is flexibility. In general, they are less expensive than whole life insurance. They may be an excellent choice as a result if you want permanent protection with adjustable premiums and death benefits and don’t mind monitoring the policy.
Indexed universal life insurance
In the case of indexed universal life insurance, the policy’s cash value is based on the performance of a predefined stock index, typically the Dow Jones Industrial Average or the S&P 500. Your policy’s value could grow if the index experiences gains.
Additionally, the amount of potential stock market gains that potentially benefit your investment will be expressly stated in your insurance contract. While an indexed policy may provide loss protection, any gains above a specific threshold may be limited. Additionally, the account value of your policy might only reflect a portion of the performance of the index to which it is linked. For instance, a 5% annual gain in the index would only lead to a 4% increase in your policy’s value if it had an 80% participation rate.
If you were considering an indexed universal policy, you should talk over these issues with your financial advisor.
Who might be a good fit
A policyholder who wants a combination between the adaptability of a universal life insurance policy and part of the earning potential of variable universal life insurance may find appeal in the sophisticated product known as indexed universal life insurance.
Variable universal life insurance
The owner of a variable universal life insurance policy decides which investment accounts will receive the payments. It’s possible to have big gains or losses when investing, like with any sort of investment.
There is a chance that long-term investment profits could surpass the whole or universal life insurance policy’s guaranteed returns. Your cash worth will decrease in years when the market is weak, and you might have to pay more premiums to increase it.
Additionally, compared to other types of life insurance, variable universal life insurance often includes extra fees in your monthly premium to pay for management, trading charges, and other expenses. This is one of the reasons why many families might wish to look into alternative life insurance policies that have lower costs and less risk.
If you select this kind of policy, keep in mind that it necessitates continuous monitoring because the market moves so frequently. For instance, the loss of account value could result in greater policy expenses to pay for the death benefit if the accounts in which the premiums are invested fall significantly. The policy would no longer serve its primary function of paying a death benefit to the policyholder’s beneficiary if you are unable to pay higher premiums or do not have enough cash value to cover the costs of maintaining the policy.
Who Variable universal life insurance may be a good fit for
For those looking for whole-life coverage who are risk-averse, desire a possibly higher return than whole-life policies, and don’t mind the volatility of returns, variable universal life insurance is a decent alternative.
Guaranteed issue life insurance
Life insurance with a guaranteed issue is precisely what it sounds like. Regardless of age or condition, all applicants are guaranteed approval for coverage. Be aware of a few restrictions that come with guaranteed issue life insurance before you apply for a policy.
To begin with, you’re frequently restricted to a death benefit of $50,000 or less, which, if you have dependents who depend on you financially, is probably insufficient to fulfill their long-term needs. This kind of insurance is frequently referred to as a final expense policy because it’s intended to assist your family in paying for your funeral and other funeral-related expenses.
A “graded death benefit” is a feature that is frequently included with a guaranteed issue life insurance policy. This means that if a specific number of years have passed between the time you purchase the policy and your death, your loved ones will only receive the full death benefit. This is done to stop people from purchasing life insurance when they already know they won’t live long. The payout can often only be made three years after you buy an insurance thanks to the graded death benefit. This prohibition applies to all natural causes of death. So, in the event of your untimely death within this time, your beneficiaries might not actually receive the full death benefit.
A sort of permanent life insurance is guaranteed issue life insurance. The coverage is in place for as long as you pay the premiums. You may pay significantly more for a guaranteed issue life insurance policy than you would for a medically underwritten or simplified issue policy because permanent life insurance is typically more expensive than term life insurance to begin with.
Who Guaranteed issue life insurance may be a good fit for
A simplified issue or medically underwritten life insurance policy that offers $50,000 or less in coverage will typically be more expensive. If health issues prevent you from being approved for medically underwritten coverage, this is a good alternative. However, you need a sufficient death benefit to pay for your burial and other bills after you pass away.
Conclusion
You undoubtedly need life insurance if your spouse, kid, or other family members depend on your income to maintain their standard of living. Different budgets, financial needs, and even medical issues can be accommodated by a variety of life insurance policies. Nobody’s needs are the same for life insurance. Most consumers can locate a product and coverage that suit their particular needs with a little bit of investigation.
People who want affordable coverage for a specific period of time, such as until their loved ones are no longer financially dependent upon them, may find that a term life insurance policy is an attractive option. A permanent policy can provide coverage for the rest of your life combined with the opportunity to increase the cash value of your insurance.
There’s no reason why picking the best coverage for you has to be difficult. Take into account both the price that fits inside your budget and the position that life insurance will take in your financial strategy. Most importantly, keep in mind that you are conducting all of this research and purchasing an insurance to assist in protecting the people in your life who are most important to you financially.