Straight Forward Insurance

Term

For most young families, term insurance is the most appropriate. It is the least expensive option for locking in a guaranteed rate. This frees you up to tackle debt and start savings. The downside to term insurance is that protection ends at the end of the term. Hopefully with disciplined savings and investing you are now well off and self-insured. If not, most term insurance policies offer options to extend coverage. You "rent" rather than "own" term insurance for a specific period. After the term ends, the premiums you paid to "rent" the coverage are no longer yours, unless you get a term policy with return of premium.

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Return of Premium

If you want less expensive insurance than whole life and you want your premium returned if you outlive your term duration, you want to explore "Return of Premium". Like straight term insurance, it is locked in for a specific period. Unlike straight term insurance, premiums (minus administrative costs) are returned at the end of the term if you survive the term. Compare costs with straight term before deciding which best meets your family's insurance needs.

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Universal Life

Universal Life is typically the least expensive option for those wanting the benefits of "owning" their insurance with lower premiums than other permanent options. However, Universal Life is a bit tricky--you need to make sure to include a "no-lapse prevention" rider or you may find your premiums increasing by 3x or more in your golden years. If you already have one of these, it is recommended to have a professional look at your policy. Michael offers insurance consultations free of charge--and with no obligation.

 

Accumulation IUL

For some who do not want to save, invest, and insure separately, an accumulation IUL rolls all these functions into one. Unfortunately, it is expensive. Insurance fees typically result in less equity and less flexibility than is realized than buying term insurance and investing cost difference between term and an IUL. Some IUL's are designed to maximize cash value that can be converted into a stream of income in retirement. There are other costs to consider with IUL, so we recommend a live conversation with Michael if you want to explore this option.

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Whole Life

For those conservative money persons, most Whole Life offers a guaranteed rate of return to build cash value. This cash value can be accessed through tax-free loans to yourself. This "permanent insurance" typically guarantees a payout to beneficiaries through the 120th birthday of the insured. If not used by retirement age, it can usually be converted into an annuity or guaranteed payout in retirement. Because this type of life insurance almost always pays benefits (and pays higher commissions to selling agents), it is more expensive.