Understanding the Different Types of Life Insurance

Understanding the Different Types of Life Insurance

Ever wonder what type of life insurance is best for you? It depends on various factors, including how long you want the policy to last, how much you’re willing to pay, and if you wish to use the policy as an investment vehicle. Let’s look at some options.

 

Term Life Insurance

  • Pros: It’s often the cheapest option for buying life insurance
  • Cons: If you outlive your policy, your beneficiaries won’t receive a payout

Whole Life Insurance

  • Pros: It covers you for your entire life plus builds cash value
  • Cons: It’s typically more expensive than term life and some other permanent policies

Guaranteed Universal Life Insurance

  • Pros: Due to the minimal cash value, it’s cheaper than whole life and other forms of universal life insurance
  • Cons: Missing a payment could mean the policy lapses and could be costly to reinstate

Indexed Universal Life Insurance

  • Pros: You can access cash value, which could grow over time, and you may see considerable gains if the stock market performs well
  • Cons: Due to interest rate caps, participation rates, and other limitations, the cash value doesn’t take full advantage of stock market gains

Variable and Variable Universal Life Insurance

  • Pros: There’s potential for considerable gains on your investments, and you can take partial withdrawals from the cash value or borrow against it
  • Cons: It behooves you to be diligent at managing your policy as the cash value can change daily based on the market, and any administrative fees are deducted from your payment before going toward the cash value

Simplified Issue Life Insurance

  • Pros: There isn’t a medical exam required for coverage
  • Cons: Despite no medical exam, you’ll have to answer some questions and could be turned down based on those answers

Guarantee Issue Life Insurance

  • Pros: You can’t be turned down for coverage if you’re within the eligible age range, which is typically 40 – 85
  • Cons: This is an expensive way to buy life insurance, and coverage amounts are generally low
Adapted from Nerd Wallet1
Securities offered through SCF Securities, Inc. Member FINRA/SIPC 155 E. Shaw Ave. Suite 102, Fresno, CA 93710 | (800) 955-2517 | Fax (559) 456- 6109. SCF Securities, Inc. and Creative Financial Strategies LLC are independently owned and operated. www.scfsecurities.com Note: Securities offered through SCF Securities Inc., Investment Advisory Services offered through SCF Investment Advisors, Inc.This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.
1 https://www.nerdwallet.com/article/insurance/types-of-life-insurance
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