What Type Of Insurance Is Best For Me?

Choosing which type of insurance is best for you is not always an easy decision. There are many factors that you must consider such as age and family expenses. First let’s break down the 3 most popular options available; Term, Whole Life, and Universal.

Term Life Insurance

Term life policies provide a set amount of coverage for a predetermined amount of time. Term polices are the most popular as you can purchase large amounts of coverage for a relatively low cost with a renewal option. The benefits to having a term policy include:

o Affordable

o Renewable in 1 year-increments with increasing premiums

o Can be converted to a universal life policy

o Guaranteed coverage with no need of a physical exam at the terms expiration

If you need a policy to pay off debts or provide extra coverage during your child’s life, term is a great option for you. The downfall to term polices are that if you live past the expiration date no money is paid out. Term policies are usually the most popular option.

Whole Life

Whole life insurance (also called permanent life) protects you throughout your entire life, unlike a term policy that does not pay out after the expiration date. The benefits to having a whole life policy include:

o Guaranteed payouts

o Tax-free to your beneficiaries

o Level premiums

The primary advantages of a whole life policy are the fixed premiums, the tax benefits and the guarantee that your policy will be paid out, unlike a term policy. The premiums for whole life are higher than a term policy, however they work out to be cheaper over the life of the policy. The primary disadvantages of having a whole life policy are its inflexibility. The terms are set at the time the policy is set up. Also, you may be at a disadvantage as the rate of return with the policy may be equal or worse than a simple savings account.

Universal

Universal life policies are flexible and allow you to change your level of coverage in accordance with your lifestyle. The benefits to having a universal policy include:

o Greater flexibility

o Cash account that can be withdrawn early in case of emergency

o Tax benefits

Universal policies are a relatively new concept and may be difficult, if not impossible to find in Australia. All universal polices include a cash account and interest is accrued. The value of the policy depends on the amount of cash invested minus any surrender fees (if any) and administrative costs. A major criticism of these policies is that the agent stands to make much more commission than if they sold a term policy.

Now that you know more about the different types of policies, the next step is to contact an insurance carrier of your choice for more details. Most people do not consider life insurance until later in life or after the birth of a child. If you start preparing early, more options and better rates will be available for you.