The old saying is that “if you love someone or owe someone”, you need insurance to protect you. Life insurance provides a tax-free lump sum of money to replace lost income after your death, giving financial peace of mind to people whose loved ones rely on them. While there are a myriad of different names and specialties, at a high level, there are two main types of life insurance to choose from—term insurance, which covers a specific length of time at a low cost, and permanent insurance, which generally covers the whole life of the insured.
Term Life Insurance
Term insurance is life insurance coverage in its most straightforward form. It is also, compared to other types of insurance, much more affordable because if has one specific purpose—protecting your income for your family. Many people refer to it as a financial safety net, stretched over a given amount of time, or “term”, of your choosing.
It works this way—you make the same payment every period (usually monthly), and if you die within that term, the coverage amount of the policy will pay to your beneficiaries. At the end of your term (the length in years that you chose), your coverage will end, and so will your payments. The hope—and the reason it is referred to as a financial safety net—is that you never needed it and your coverage did its job protecting you and your family.
Permanent Life Insurance
Permanent life insurance is any life insurance policy that is intended to provide coverage for as long as you live. Unlike term life insurance, which lasts for a set period of time then expires, permanent life insurance policies remain active for as long as you pay your premium.
There are various types of permanent insurance, but whole life insurance is the most common. The cash value of a whole life insurance policy usually grows at a modest interest rate and premiums stay level for the duration of the policy, but you must continue making payments or the policy could lapse, and you could lose not only the death benefit, but also the payments you have made.
Final Expense or “Burial” Life Insurance
Final expense, also called “burial insurance” or “funeral insurance” policies are usually whole life insurance policies that contain low death benefits and easier underwriting requirements. Burial insurance is typically designed for seniors who want to make sure that they don't leave their families with the costs of paying for a funeral. These policies ensure that their family has money to pay for funeral or pay off a debt when they pass away.
Final expense policies typically have death benefits under $50,000. The insurance coverage lasts for the entirety of your life and, when you pass away, your beneficiaries will typically receive a payout large enough to cover the cost of a typical funeral (or more). Final expense policies usually have a shortened (less stringent) underwriting process, either with no medical exam or guaranteed acceptance after answering a few questions.
Final-expense are usually whole life policies, and so they do typically also have a cash value component. (This is the amount of money you would receive if you turned the policy back in to the insurer.) A certain amount of your monthly premiums helps fund the cash value, which is also why burial insurance policies can be more expensive than term insurance.
Integriant is happy to help you with your life insurance needs, whether those be for a specific term or a permanent policy. In general, most financial experts adhere to the old adage “Buy term and invest the difference.” So if you are looking to protect your family if something were to happen you, term life insurance is likely your best option. If you like the comfort of being protected no matter how long you live, we can help you with that as well.
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