LifeNet Insurance Solutions Blog

Life Insurance Plans Pros and Cons

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All life insurance plans have their own benefits and limitations.  Your personal needs and budget will help determine which type of life insurance will work best for you.

Term Life Insurance Plans

Term life insurance is usually the least expensive type of insurance.  Although there are several options, we feel the best term life insurance plans guarantee the face amount and premium for the entire term period.  You know that as long as you pay your premium, your policy will remain in force with no changes. 

Term life insurance Pros:

1. Need coverage for a specific time period.
2. Have limited funds with which to pay the premium.
3. Easy to understand. 

Term life insurance Cons:

1. You may live longer than your specified term and need to purchase additional insurance at that time.  You will be older, perhaps not as healthy, and the cost will be higher.

Universal Life Insurance Plans

Universal life insurance is an extremely flexible type of insurance.  Policies have multiple features that need to be defined. 

Some choices you will have are:

1. Will the policy accumulate cash?
2. There are riders available to customize your policy such as:

Accelerated Death Benefit rider, Accidental Death Benefit rider, Additional Insured rider, Children’s Insurance rider, Cost of Living Adjustment rider, Long Term Care rider, Waiver of premium rider, etc.

It is very important when purchasing universal life insurance that you work with an agent who is familiar with structuring these policies. 

Universal life insurance Pros:

1. Premiums can be guaranteed not to change for your lifetime. 
2. Flexible structure to meet your objectives.
3. Lasts for your lifetime.

 Universal life insurance Cons:

1. More expensive than term coverage.

Whole Life Insurance Plans

Whole life insurance policies are permanent policies that “endow” at a point during the life of the policy.  This means that the cash value of the policy equals the face amount.

Whole life insurance Pros:

1. Borrow money from the policy tax free under certain circumstances.  (This will reduce the face amount if the loan is outstanding when the insured dies).
2. Cash value earns interest and/or dividends as established by the insurance company.

Whole life insurance Cons:

1. More expensive than term and other permanent coverage.
2. Your beneficiary will usually receive the face amount of the policy minus any loans.  The cash value remains with the insurance company.

Key Points 

Each type of life insurance has its benefits and limitations.  Be sure to consider your objectives carefully when deciding what type of insurance to purchase. 

An independent life insurance agent is your best option when looking for insurance.  They have the most resources available to help you decide what best fits your needs and budget.