Types Of Life Insurance And Which Is Right For You

Types Of Life Insurance

In the long run, a good life insurance policy can give financial security to your family if you are no longer able to care for them. It can also provide some considerable peace of mind in the near run. It’s worth doing some research to identify the finest life insurance and the exact policies that make the most sense for you before purchasing life insurance.

Its objective is simple: to replace your income for your family if you die. However, with so many options, selecting the perfect coverage for you may be a confusing and frustrating experience.

Do you need life insurance?

Many people, on the whole, could benefit from having some form of life insurance in place. Most experts think that persons with jobs and children should have a substantial level of coverage in case the worst happens.

If you’re not sure whether you need life insurance, these are some of the reasons you should:

  • Income replacement: At its most basic level, life insurance is designed to replace your income when you pass away. If you have a spouse and/or dependents who rely on you during your working years, this is very important.
  • Coverage for other financial obligations: If you owe money on a mortgage, a car loan, credit card debt, or other debts, the earnings from a life insurance policy can be used to pay them off. If you don’t have it, your family may be left to figure out how to liquidate your possessions or pay your expenses after you pass away.
  • Final expense coverage: In 2019, the median cost of a funeral including burial and viewing was $7,640, according to the National Funeral Directors Association (NFDA). Your family may struggle to afford these final expenses if you don’t have life insurance.

Benefits of Life Insurance

There are numerous advantages to owning life insurance. Some of the most important benefits and safeguards provided by life insurance policies are listed below.

The majority of people buy life insurance to provide money to beneficiaries who would be financially disadvantaged if the insured died. The tax advantages of life insurance, such as tax-deferred growth of cash value, tax-free dividends, and tax-free death benefits, can give extra strategic opportunities for affluent individuals.

Considerations Before Buying Life Insurance

Research policy options and company reviews– Because life insurance plans are such a major expense and commitment, it’s vital to conduct thorough due diligence to ensure that the firm you choose has a good track record and financial strength, especially since your heirs may not get a death benefit for decades. We looked at a number of organizations that provide various types of insurance and ranked the top in a number of categories.

Life insurance can be a wise financial tool for hedging your bets and providing protection for your loved ones if you pass away while the types of policies are active. 

How Do You Qualify For Life Insurance?

Life insurance is available to anyone, but the cost of the individual’s premium level can depend on risk factors like age, health issues, and lifestyle. You can find out more by speaking to one of our consultants. Life insurance applications generally require the customer to provide medical records and medical history and submit them to a medical exam.

Life insurance policies are traditionally either guaranteed approval or non-guaranteed approval life. It is important to compare rates, benefits, and waiting periods before any decisions are made.

How Medical Condition Affects The Cost of Life Insurance

Life insurance is determined by two factors: age and health. Older folks pay more for their policies, but they’re also more likely to be offered coverage.

Younger people are less likely to die in a given time frame. A lot of people believe that’s obvious, but it actually has been proven by actuarial science– the discipline that assesses risk for insurance purposes using statistics and mathematics.

Your personal habits and gender will affect how much life insurance will cost you. Risky habits and dangerous hobbies can make life insurance more expensive. However, women tend to live longer so they enjoy generally lower rates of life insurance over their lifetime.

What Are The Most Common Life Insurance Policies?

Term life insurance

Term life insurance is frequently less expensive than whole life insurance. If you die during the set coverage period, your family receives a payout from a traditional term life insurance policy. 

The disadvantage is that you will never see a penny of that money, and your loved ones will not if you outlive the term policy. Another factor to consider is that the cost of a term policy rises as you get older, which could tilt the scales in favor of a whole life insurance policy in the long run.

Whole life insurance

A common type of cash value insurance is whole life insurance (also known as traditional permanent, straight life, or regular life insurance). At the end of this post, we’ll go over several less-common forms, but for now, let’s concentrate on whole life insurance.

Whole life insurance, as the name suggests, covers you for the rest of your life rather than just a certain period. One of the reasons why a whole life policy is more expensive than a term life policy is because of this. However, paying greater premiums has an added benefit.

What Is The Difference Between Term and Whole Life Insurance?

Term life insurance is the most straightforward to comprehend and offers the best value. It protects you for a set amount of time, such as 10, 20, or 30 years. If you don’t die before the end of the term, your coverage stops, and no money is paid out.

Whole life insurance is more complicated and expensive than term life insurance, but it comes with additional benefits. Whole life insurance is the most well-known and simplest form of permanent life insurance, and it covers you until you pass away. 

What Are The Greatest Life Insurance For 4 Stages Of Life

Term life insurance

Some financial gurus suggest that obtaining life insurance while you’re young and have no one to support you is pointless. While this may be true for many, it ignores several crucial factors.

Even if a potential beneficiary does not now rely on you for financial support, the money could be used to pay for your burial, which is effectively an expense for you. And funeral expenses aren’t the only thing to think about.

In the end, it’s a personal choice that only you can make, but there are certain things to think about when considering whether or not a term life policy is good for you. Rather than leaving your benefits to Fido, consider selecting your partner or a close relative as a beneficiary – a parent, brother or sister, or anybody else who would be responsible for paying your burial expenses or resolving any other financial obligations on your behalf.

Best for young families: Whole life insurance

A whole life insurance policy could be an excellent alternative to consider if you want to provide for your family while also investing in your future.

Whole life insurance, as previously said, has both advantages and disadvantages. It costs more than term life insurance because, in addition to the death benefit, your policy builds up cash value over time that you can borrow against. As your family grows, this could be a useful benefit.

Whole life insurance, as the name implies, covers you for the rest of your life, or at least as long as you make on-time payments and follow the policy’s terms and conditions. 

Whole life insurance

If you’re a new parent, you might want to think about getting child insurance coverage that your child can use in the future. Though this is a type of whole life insurance that covers children in the event of death, the major reason we’re considering it is for the benefits your child could receive later in life, when they’re ready to pay for college or buy their first house.

Hopefully, you won’t have to use the death benefit. We recognize that no amount of money can compensate for the death of a child. A life insurance policy for a child, on the other hand, might be an investment in your child’s future while also giving you peace of mind that if tragedy strikes, the coverage would be there to help.

Guaranteed issue life insurance

If your children have grown up and moved out, you may not feel the need to invest in a costly life insurance policy. However, it may be worthwhile to consider purchasing a small policy to assist your family in paying for your funeral expenditures.

If you’re worried that your age or health will cause you to be turned down for coverage, seek a “guaranteed issue” life insurance policy that doesn’t require a medical exam. 

You won’t be turned down for a guaranteed issue of life insurance coverage because of your age or poor health, as the term implies. 

Insurance company to consider: AAA

We found that AAA has one of the top guaranteed issue life insurance policies available. There is no medical checkup required, and the death benefit can be as much as $25,000. If you’re between the ages of 45 and 85, you can apply for the policy.

Variable life insurance

Another type of permanent coverage with a death benefit and a savings component is variable life insurance. The primary distinction is that premiums on variable life policies are usually invested by your insurance company in stocks, bonds, and money market funds in order to earn a better return.

Variable life insurance is often regarded as a riskier option due to the investment component. Taking on more risk, on the other hand, can result in possibly higher profits. 

Supplemental life insurance

This is a type of life insurance, in contrast to group life insurance, is any additional life insurance you can purchase to augment your coverage. Employees typically pay for extra life insurance coverage through payroll deduction.

Supplemental life insurance has an intriguing feature in that, similar to group coverage, employees can often avoid passing a medical test and still qualify for a policy.

No exam life insurance

While most life insurance policies require you to take a medical exam before being accepted for coverage, those in good health can acquire no exam life insurance. Providers can offer no exam life insurance because of sophisticated computer algorithms that determine which customers are at low risk of dying young based on their age and other criteria.

In most cases, no exam life insurance is available in the form of term life insurance. You may pay greater premiums than you would with an underwritten policy and a routine medical checkup because no medical exam is necessary.

Permanent life Insurance

Permanent insurance policies offer a death benefit and cash value. The death benefit is money that’s paid to your beneficiaries when you pass away. Cash value is a separate savings component that you may be able to access while you’re still alive. Permanent life insurance lasts from the time you buy a policy to the time you pass away, as long as you pay the required premiums.

Universal life Insurance

Permanent life insurance is a type of life insurance with a guaranteed level of coverage for the lifetime of the insured person. A universal life policy can protect an individual from an income drop in retirement because there is a guarantee that your level of coverage will never change.

Like many permanent insurance policies, universal life combines a savings component with lifelong protection. When you pass away, the policy’s death benefit is paid out to your beneficiaries.

Other Life Insurance Options

Consider other types of permanent life insurance if you require long-term coverage but want more investing options than whole life insurance offers.

  • Life insurance that pays interest based on current market rates is known as universal life insurance (like those that determine mortgage interest rates).
  • Variable life insurance and variable universal life insurance both allow you to make direct stock market investments.
  • Indexed universal life insurance is a type of insurance that pays interest based on the performance of stock indices.

All of these choices, in addition to the investments they provide, can be less expensive than whole life if the market cooperates. While the costs of whole life and term policies are fixed from the start, the costs of these other options will change depending on the performance of your cash account and the policy selections you pick. 

Understanding Permanent Life Insurance

Some permanent life policy does have a waiting period after purchase during which borrowing on the life company’s savings is not allowed. This allows sufficient cash to accumulate in the fund. If the amount of the total unpaid interest on a loan, plus the outstanding loan balance exceeds the amount of a policy’s cash value, the insurance policy and all coverage will terminate.

Advantages and Disadvantages of Cash Value Life Insurance

The cash value component provides policyholders with a living benefit from which they can withdraw funds. The net cash value component of a life insurance policy is the amount left over after the insurance company deducts its fees and any expenses incurred during the policy’s ownership. There are a variety of ways to get money.

What Does Life Insurance Cover?

If an insured person dies while their life insurance policy is active, they will get a death benefit. The death of a spouse or children might be supplemented with additional coverage. If the insured is diagnosed with a terminal illness or becomes permanently incapacitated and unable to work, riders may provide a payout.

When a death occurs as a consequence of an accident, life insurance may provide additional benefits. Some life insurance contracts build up a cash value that can be borrowed or withdrawn on a tax-deferred basis (after a certain age).

What Happens When Term Life Insurance Ends?

A term life insurance policy will expire at the end of its specified terms, such as 10, 20, or 30 years. Unless you acquired “return of premium term life insurance,” you will not be reimbursed for your premiums paid.

If you still require life insurance at the end of the term, you can usually renew it for a higher price. Before paying the higher renewal premium, it’s a good idea to get quotations for a new policy.

Some folks decide they no longer need life insurance before they reach the end of the term and stop making payments. If you end a policy and your life circumstances change later, you could regret not having kept the policy.

How Much Does Life Insurance Cost?

The cost of life insurance varies greatly depending on a variety of criteria. The sort of life insurance you purchase will be one of the most significant cost variables. For the same amount of coverage, a term life insurance policy is much less expensive than a whole life insurance policy.

The following are some of the most prevalent factors that influence life insurance premiums:

  • Age. You’ll pay less for insurance if you get it when you’re younger. This is because your chances of dying are lower.
  • Health. Your health has a significant impact on the cost of life insurance. In order to calculate your life expectancy, the insurer will assess your history and current medical problems.
  • Lifestyle. Higher life insurance rates can be attributed to your driving history, criminal background, and dangerous employment and hobbies.

How much life insurance do you need?

At the end of the day, only you can decide whether you want life insurance coverage until the day you die or for a set period of time. However, the cost of various types of life insurance coverage may ultimately assist you in making this decision. After all, permanent life insurance premiums might easily cost ten times as much as term life insurance for the same level of coverage.

How Do We Pick The Best Life Insurance For Each Stage of Our Lives?

We began by analyzing the numerous demands that people may have at various times of their lives.

If you’re a single adult, a top-of-the-line life insurance policy with high premiums and huge payments may not be necessary. If you have small children, on the other hand, you may desire insurance that allows you to invest in their future.

We couldn’t possibly evaluate all of the circumstances that might influence your decision, but we did our best to think of life insurance policies that might suit people during these main life periods.

Should You Buy Life Insurance?

Even if the policy is only enough to cover their final expenses, most people should have some type of life insurance protection in place. Once all, it will be up to your dependents and other family members to cover your funeral costs and other final expenses after you die away. 

Life Insurance Terms You Need to Know

When looking into life insurance coverage, you’ll need to grasp a few phrases to fully comprehend what’s covered.

  • Take it at face value. The face value of an insurance policy is the amount of money that would be paid to your beneficiaries if you died while the policy was active.
  • Death benefits. The death benefit is equal to the face value of the policy, which is the amount paid to your beneficiaries upon your death. If any payouts are withdrawn from the policy due to an accelerated benefit provision, or if any withdrawals or loans are taken against the cash value of the policy, the policy death benefits may be decreased.
  • Cash Value. A portion of the premium in some life insurance policies is used to accumulate cash value within the policy. This cash value can earn a fixed rate of interest or be linked to an investment index for increased growth. The cash value represents tax-deferred savings that can be borrowed on a tax-free basis.
  • Riders. A rider is an addendum to a life insurance policy that provides additional benefits. This could include coverage for a spouse or children, increased benefits in the event of an accident, or the opportunity to access insurance assets sooner. Rider costs are usually calculated as a percentage of the policy premium or as a one-time annual fee.

Life Insurance Riders and Policy Changes

Some insurance companies offer customers the choice to modify their coverage according to their needs. Modifications are possible through policy riders, which are often included in the plan when purchased. 

Some policies include certain riders or charge a fee to exercise the riders, but the policyholder typically pays an additional premium for each rider in their base premium.

A Note On Financial Strength

It’s critical to consider the financial strength of different insurance firms while deciding between different life insurance products.

The ability of a corporation to meet its ongoing insurance policy and contract commitments is measured by this rating. To put it another way, it should offer you a good indication of whether a corporation will be able to pay your claim.

Before deciding on a policy, you should compare the FSR ratings of several insurance providers. Start by going to A.M. Best’s website and looking up a certain company and reading their Financial Strength Rating Guide. To access the rating content, you must first register.

Who Needs Life Insurance? 

Life insurance is designed to safeguard your assets and pay your debts if you die. You may require life insurance for a variety of reasons, including:

  • You’ve tied the knot.
  • You have a mortgage on your home.
  • You wish to pay for the funeral and burial costs.
  • You’re looking for a way to augment your retirement income.
  • You owe a lot of money.
  • Parents with special-needs adult children – The death benefit can be used to fund a special needs trust that will be managed by a trustee for the benefit of the adult child.
  • Seniors who want to leave money to adult children who provide their care – Many adult children sacrifice time to care for an older parent who requires assistance.
  • Families who are unable to pay for a burial or funeral expenses

How Much Life Insurance Do You Need

What you need in terms of life insurance is determined by your goals. You won’t need as much money if you’re just addressing end-of-life expenses rather than trying to restore lost income. The calculator below can assist you in determining the amount of life insurance coverage you require.

Connect with a fee-only financial advisor if you’re looking for a long-term policy. The counselor can explain how life insurance coverage fits into your overall financial picture.

What Kind of Life Insurance Should I Get?

Term life, in a nutshell (or two). It’s the only way to go if you want to be smart, save money, and actually give long-term peace of mind to yourself and the people you care about. 

For most people who require life insurance, term life insurance policies are the best option. They’re usually the cheapest, easiest to comprehend, and give the straightforward protection that most people looking for coverage seek.

That isn’t to say that other types of life insurance policies aren’t suitable for everyone. A permanent life insurance policy is marketed as a “forced savings vehicle” by some. Many people find it difficult to save enough money for retirement, and a permanent policy lets them put money aside for something they’d have to pay for anyhow.

How to Calculate Your Life Insurance Needs

A term life insurance coverage that covers 10 to 12 times your yearly pre-tax income is recommended. If you earn $40,000 per year, you should have at least $400,000 in insurance coverage. 

If your surviving spouse invests that $400,000 in a reputable mutual fund with an average annual return of 10–12%, they might withdraw $40,000 every year to replace your income without ever touching the original investment.

Which Are The Top 3 Life Insurance Companies?

1. Prudential

Why We Chose It

Based on the company’s history, which stretches back to 1873, the vast selection of products it offers, and its strong financial strength ratings, Prudential was named the best overall life insurance company.

Prudential offers term life insurance, universal life insurance, indexed universal life insurance, and variable universal life insurance, as well as riders such as an accidental death benefit, living requirements benefit, and a children’s protection rider that can be added to your policy.

2. State Farm

Why We Chose It

State Farm was chosen as the best company for rapid-issue policies because you may apply online and get term life insurance without having to jump through hoops. State Farm’s high ratings and extensive history also helped it climb the ranks.

Also worth noting is the fact that State Farm came out on top in the J.D. Power 2020 U.S. Life Insurance Study, which examined the experiences of life insurance and annuity customers across the United States.

When it comes to life insurance, State Farm offers term life insurance, whole life insurance, and universal life insurance. State Farm offers instant answer term life insurance coverage that can be applied for online and purchased with no medical exam. You must, however, respond to health questions in your application.

3. Transamerica

Why We Chose It

Transamerica offers very affordable term life insurance coverage and has a lengthy track record of financial soundness and stability, making it the best value in life insurance in our review.

Transamerica also offers a broad selection of life insurance, whole life insurance, universal life insurance, index universal life insurance, and ultimate expense life insurance, among other options.

To acquire a quotation for most of Transamerica’s life insurance products, you must speak with an agent. Quotes for term life, on the other hand, can be found online. Its term insurance prices are usually very good value. 


We understand that life insurance isn’t for everyone.

If your loved ones rely on your income or would be responsible for repaying your obligations, you should seriously consider purchasing term life insurance. However, whether whole life insurance is a suitable investment is a matter of controversy, and it’s likely something you should discuss with your financial adviser and an insurance professional.

When it comes to choosing insurance coverage, the most crucial factor is to choose one that makes you feel financially secure.