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If there is one thing we can count on, it is the fact that life changes: marriages, divorces, children, college tuition, aging parents, debt, illness, etc. It is very important we realize that, depending on age and financial responsibilities, our life insurance needs change also. We should routinely reevaluate our needs to ensure we are properly covered. I was very surprised to learn that 6 million U.S. households are without any kind of life insurance protection and perhaps even more surprised to learn that many with protection are actually underinsured. Think about this question: If you died tomorrow, how would your loved ones fare financially? If you’re not able to confidently answer that your loved ones would be well-provided for, then you may want to reevaluate your coverage. Consider some of the advantages and disadvantages of the four basic types of life insurance:

  • Term Life Insurance –Coverage is purchased at a specific price for a specified period of time (term). If the insured dies during that time frame, the death benefits are paid; otherwise, new terms will be determined at the end of the contract.
    •  Advantages
      • Premiums are usually lower than those for permanent insurance so you can buy higher coverage.
      •  A great way to cover a specific need that will disappear in time, such as mortgages.
      • Some plans give you automatic convertibility to permanent insurance, meaning you can convert to permanent insurance at the end of the term without questions
    • Disadvantages
      • Premiums significantly increase after the specified term.
      • Coverage terminates at the end of the term or may become too expensive to continue.
      • Doesn’t offer cash value or paid-up insurance.
  •  Whole Life Insurance Coverage remains in effect for the insured’s whole life and requires (in most cases) premium payments every year into the policy.
    • Advantages
      • Premium payments are locked.
      • Builds cash value.
      • Guaranteed interest rate.
      • Can access the money in cases of emergencies.
      • If you stop paying early, in many cases , you can elect to have a reduced amount of insure fully paid up or  other options
    • Disadvantages 
      • Higher premiums.
  • Universal Life Insurance – Flexible life insurance that combines the low cost of term life insurance with a savings element. The policy can be reviewed and changed if insured’s situation changes.
    • Advantages
      • Flexible premium.
      • Ability to make cash withdrawals.
      • Savings is invested by the insurance company for cash value buildup.
      • Cash value builds more quickly than whole life.
      • Gives the ability to the insured to use the interest to help pay premiums.
      • Can borrow against policy.
      • Guaranteed minimum interest rates.
    • Disadvantages
      • Premium needs can change over time. The policy can run out of money if not adjusted when interest rates drop.
      • If you terminate the contract early, you will pay a penalty.
  • Variable Universal Life Insurance– Permanent life insurance with flexible terms and investment possibilities directed by the insured.
    • Advantages
      • Big financial gains if market changes are positive
      • Earned interest can be applied towards the premium amount.
      • It is a financially-flexible account.
    • Disadvantages
      • Typically high premiums.
      • No guaranteed interest rate.
      • Investment is directed by the insured and policy can run out of money if not adjusted when interest rates drop.

Sure, we can count on the fact that life changes…but wouldn’t it be nice if we could also count on a confident “Absolutely!” when someone asks the question I posed at the beginning of this blog? You may find life insurance rates are more affordable than you think. Talk to your agent or contact one of YMI’s licensed life agents to discuss your current coverage needs.