Just as their are varied reasons for purchasing life insurance, there are a few main kinds of coverage. There are basically two types of coverage, term and permanent. To explain, life insurance can be bought to satisfy a transient need like shielding children until the age of majority or insuring the requirements of a private loan. On the other hand, permanent coverage is generally used to protect a spouse, maximizing an allowance or for estate planning.
Let’s take a look at permanent coverage. If you are a baby boomer or older, permanent coverage is usually linked with whole life insurance. Whole life insurance quotes were something that you received while sitting with you local agent who told you all the advantages of whole life without any possible choices. Also, comparing whole life insurance quotes between carriers is terribly difficult and doesn’t lend itself to a comparison as does term insurance. Comparisons are tough because the premiums and cash value are tied to both current and guaranteed rates over many years. Predicting these rates always leaves potential benefits to chance.
Another kind of permanent coverage appeared several years back. Known as “guaranteed premium universal life”, it very quickly became the selection of many people with a need for permanent life insurance. Because this coverage has no cash value but guarantees the annual premium and death benefit, comparison of policies is very simple.
When I speak with clients who currently own whole life, many are amazed to find out the their beneficiary only receives the death benefit and not the cash value. Additionally, any loans outstanding on the policy will be subtracted from the face amount.
While there are both benefits and downsides to all kinds of permanent insurance policies, your number one concern ought to be to decide what your insurance coverage has to do for you. Once that is accomplished, consult a seasoned independent agent to help settle on a type and amount for your policy, and then steering you through the underwriting process.
