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Considering life insurance? Here’s how to get the right type of policy - Part 2

As you shop for and compare life insurance policies, you should know about the many types of life insurance out there. Policies exist for every budget, whether you just need cheap life insurance coverage for your working years or you’re a high-net-worth individual who wants to pass on tax-free income to your heirs.


Keep in mind that most types of life insurance require applicants to go through a medical exam. This physical is used to determine your general level of health, as well as how much you’ll pay in premiums.


While there are types of life insurance that don’t require an exam, favorable results from a medical checkup can help you secure lower premiums or afford a higher level of coverage, so you shouldn’t shy away from taking one. With that being said, some individuals in especially good health or at a young age may be able to qualify for “no exam life insurance” at a relatively reasonable price.


Let’s break down the various types of life insurance you may want to consider and explore which type may be best for you.



Term life insurance


Term life insurance is the most basic type of life insurance coverage, but that doesn’t mean it’s any less valuable. With term life insurance, you’ll typically pay a fixed premium in exchange for a fixed amount of coverage for a specific term or period, usually 10 to 30 years. If you pass away during the term of your policy, your family is paid the amount of your fixed death benefit.


Because term life insurance coverage has a start date and an end date, this type of protection is typically the least expensive to buy. However, once your term ends, you won’t have any coverage. Also, there are different variants of term life insurance coverage you can choose from, including return-of-premium policies that let you get your premiums back when your policy ends, or term coverage you can convert to permanent life insurance later on.


Best for: People who need a considerable amount of income protection during their working years and those buying life insurance on a budget.



Whole life insurance


Whole life insurance is a type of coverage that’s permanent, meaning your policy lasts for your lifetime. While whole life is more expensive than term life insurance, the lifetime benefit that whole life offers can provide consumers with more peace of mind.


Like term life insurance, premiums on whole life insurance generally stay the same throughout the policy, and your beneficiaries receive a guaranteed fixed benefit amount at your death (provided you make on-time payments on your policy for its duration). But whole life insurance also comes with a cash value component, which many companies tout as a “savings account” of sorts that you can borrow against while you’re alive.


Best for: People who are willing to pay more in premiums for a death benefit that lasts for life, as well as potential cash value from their insurance policy.



Universal life insurance


Universal life insurance is another type of permanent coverage that combines a death benefit with a cash value component. Customers with universal life can rely on the cash value of their policy for a loan, but they can also withdraw funds over time. The cash value also earns interest that’s based on market rates, which means the amount of interest you can earn will fluctuate.


This type of coverage also comes with some flexibility when it comes to your premiums. For example, you may be able to use the cash value of your policy to adjust how much you pay in premiums each month or to cover your premiums altogether.


Some companies allow policyholders to adjust the death benefit on universal life insurance policies over time if they remain in good health. This can be useful if you want to increase your benefit amount as your family expands (though it requires paying a higher premium), or reduce it and pay a lower premium when your children are grown and your replacement income needs are less.


Best for: People who want permanent life insurance with a cash component and flexibility in their premiums and death benefit over time.



Family life insurance


The term “family life insurance” can mean many things, including any combination of policies that cover an entire family. However, some specific family life insurance policies are extended to provide comprehensive coverage for every member of a family structure.


Family life insurance policies typically include whole life coverage for the main breadwinner of the family as well as term life insurance coverage for their spouse and children. Policies usually include different benefit amounts on different members of the family so that you have appropriate coverage depending on which member of the family were to pass away.


Best for: Families who want tiered protection for each family member based on their income (if any), risk of loss, and other factors.



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EPIA inc. is a private Insurance Agency with no ties with legal entities. The information contained in this article is based on information provided by CNN's Official Website. Consumer questions on how to file their federal or state income taxes should be referred to a tax professional.

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