Knowing your options
When it comes to buying life insurance, it’s important to know your options. You’ll want to understand how long your insurance will last, how much it will cost and what it will cover.
You have 2 basic choices with life insurance: term and permanent. Both options will help protect you and your family but have different features.
Term life insurance
Term life insurance is affordable coverage for your big expenses, so you can help protect your loved ones when it matters most.
How long does it last?
You buy term life insurance for a set length of time, from 5 to 50 years. When the term is up, your policy will automatically renew each year, or you can end it or convert it to longer-term or permanent life insurance, within limits.
How much does it cost?
Initially lower than permanent life insurance but typically goes up each time your policy renews because the cost of insurance rises as you age.
What are the benefits?
The person (or people) you choose receives tax-free money when you die. They can use it however they want – for example, to help pay down debt, take care of the mortgage or send their kids to school.
Permanent life insurance
It’s guaranteed lifelong coverage that protects the people you care about. But it’s more than just insurance. Over time your policy can build value you can access for cash during your life, with certain tax implications. You can access money in your policy through a loan or a withdrawal.
There are 2 types of permanent life insurance: participating life insurance and universal life insurance.
How long does it last?
As long as your premiums are paid, you have guaranteed lifetime insurance protection. Your coverage might be affected if you change your policy or make a withdrawal.
How much does it cost?
Generally, permanent insurance costs more than term insurance.
What are the benefits?
The person (or people) you choose receive tax-free money when you die and can use it however they want.
It can build cash value over time. You have guaranteed access to these funds while you’re alive and can use them however you want.
You can borrow against or withdraw money from your policy, although if you do, it may reduce how much money the person (or people) you’ve designated will receive (called a death benefit). You may also have to pay taxes on all or part of the amount withdrawn from or borrowed against your policy.
How are participating and universal life insurance different?
Both of these types of permanent insurance feature:
- Lifetime insurance coverage
- Guaranteed premium options
- Guaranteed payout
Participating life insurance features:
- Guaranteed money that grows inside your policy
- Conservative asset management
- Guaranteed insurance payout
- It may pay a yearly policyowner dividend
- Premiums stay the same
Universal life insurance features:
- Guaranteed money that grows inside your policy on some policies
- Choice of investment options
- Ability to manage your risk profile
- Generally less expensive than participating life insurance
- Flexibility in premium payments
Applying for life insurance
For term life insurance
- Answer some medical questions.
- Go through underwriting
- You can get a quote and apply online for coverage from $50,000 up to $1,000,000
- You can get a quote and apply through an advisor for coverage from $50,000 up to $25,000,000.
For permanent life insurance
- Most permanent policies require you to answer medical questions, except for guaranteed no medical life insurance
- Most permanent policies require you to go through underwriting, except for guaranteed no medical life insurance.
- You can get a quote and apply online for coverage up to $25,000.
- You can get a quote and apply through an advisor for coverage up to $25,000,000.