Understanding Your Life Insurance Options

For some, living through a pandemic has inspired them to further investigate their life insurance coverage.  In reality, this should be done every few years or after any significant life change.

There are many different types of options in the life insurance realm, and policies can be customized in a number of ways to meet the needs of the policyholder.  The first step is learning a little about some of the main options available:

·       Term life insurance provides a death benefit for a specific length of time, usually between 10 and 30 years, and does not have a cash value to the policy.  This is often the least expensive life insurance option.

·       Universal life insurance also provides permanent insurance with a cash value component that grows tax deferred, however the premiums on these policies are flexible.  Policyholders can increase or decrease the amount the death benefit which will increase or decrease the amount of the premiums paid. This permanent insurance is typically less expensive than whole life insurance, however there is a chance that the policy can lapse if it is underfunded.

·       Whole life insurance provides insurance for your entire life (not a specific number of years) and includes a cash value component which grows over time tax deferred.  Premiums stay the same throughout the life of the policy.  While the price of this insurance is typically higher, the interest is guaranteed, and the policy can never be underfunded as long as the required premium is paid.

·       Final expense insurance – As the name suggests, this policy is usually purchased to pay for end-of-life expenses, such as funeral costs.  This is considered permanent coverage. There is no cash value component to the policy.  The cost of the premium is lower than other types of insurance, however, the death benefit amount is very limited.

One fact that isn’t always known, is that it can be cheaper in the long run to obtain life insurance as an individual as opposed to purchasing through your employer. The cost upfront looks less but over time the employer group plan will increase. If you have questions, please reach out to us at 716-445-7465 or email info@buffalofirstllc.com.