What type of life insurance do I need?

There are many kinds of life insurance to choose from so do your research to find the best one for you. / Credit: Getty Images

There are many kinds of life insurance to choose from so do your research to find the best one for you. / Credit: Getty Images

Life insurance is a smart protection to invest in. If you pass on, it provides much-needed money to your loved ones — money they can use toward your funeral, burial or any other debt you may leave behind.

Some life insurance policies also let you grow your wealth or give you access to cash if you need it.

If you’re in the market for life insurance – or want to boost the protection you already have – then reach out to a life insurance expert who can help you get started with a free quote now.

Which type of life insurance is right for your situation? Here are the four main kinds to consider.

Term life insurance

Term life insurance is a policy that only covers you for a certain number of years. If you pass away during that period, it will pay a death benefit to whomever you have named as your beneficiary. Then, they can use the money however they wish, including to settle debts, pay for funeral costs, or use them toward everyday living expenses.

Who benefits: This type of life insurance is best if you’re on a tight budget (it tends to be the most affordable type of policy) and you want coverage for a specific period of time — such as for your full mortgage term or until you retire.

For these reasons, term life insurance is one of the more popular insurance types. If you think you would benefit from this type of insurance then speak with a life insurance professional now who can help you get started.

Whole life insurance

Whole life insurance is a type of permanent life insurance policy, meaning it covers you until your death — no matter when that may be. It offers a guaranteed death benefit for your beneficiaries, and it also has a cash value account that earns interest or can be invested over time (you can also withdraw from or borrow against this account). Whole life insurance premiums are higher than term life since they provide more benefits and longer-lasting coverage.

Who benefits: A whole life insurance policy is best for people who want fixed monthly premiums, lifelong coverage, an opportunity to grow their wealth, and the chance to take cash out when needed over time. If you have long-term dependents, you can also benefit from this type of policy, as it provides a lifetime of protection for your loved ones.

Universal life insurance

Universal life insurance is another type of long-term life insurance. Like whole life, it also has a cash value component, which earns interest and may grow over time. You can also withdraw from or borrow against this cash value.

The big difference is that universal life does not have a guaranteed death benefit. Instead, death benefits are adjustable, allowing you to decrease them (and lower your premiums) as needed.

Who benefits: Universal life policies are best if you want flexibility in your coverage and premiums. They’re also helpful if you want to borrow against or take cash from your policy later on (but can do so responsibly).

Variable life insurance

Variable life insurance offers long-term coverage and allows you to use your policy’s cash value to invest in various assets via subaccounts. Because of this, there’s the potential for more wealth-building than with other life insurance types. The downside is it can impact your death benefit, reducing it — or nullifying it completely  — if your investments perform poorly. Variable life insurance policies come with set monthly premiums (only the benefit fluctuates).

Who benefits: These policies can be good if you’d like the opportunity to grow your policy’s value over time — and you’re willing to take on some risk to do it. They’re also good if you want fixed premiums for your entire coverage term.

Get help choosing the right type of life insurance

The right type of life insurance depends on your unique circumstances, budget, age, health and a host of other factors. If you’re not sure which one to choose, speak to an independent insurance agent or a financial adviser. They can help you choose the best life insurance protection (and insurance provider) for your specific scenario.

Speak with a life insurance expert now or use the table below to compare your options.

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