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What’s the Difference Between the Types of Life Insurance Plans?

Posted by Matt Simon on Mar 29, 2018

Learn More About the Three Types of Life Insurance Plans and Determine Which is Best for You

Life insurance should be flexible, and needs to change over the course of your life. As you obtain more financial responsibilities and build a family, your policy will be need to be altered to match the amount of coverage needed at that given time. The type of life insurance policy you have might also change, because you might need a wider option of benefits than you had before.

There are three different types of life insurance plans. We’ll go through each one so you can understand the differences and identify which is going to work best for you and your family at the point in your life that you’re currently in. Your age is going to be one of the biggest identifying factors.

For young adults, life insurance isn’t as dire as it would be for someone who is much older. If you’re looking for life insurance at the age of 25, typically you’re looking for coverage that’s going to cover premature death over end of life planning.

Older adults are typically going to look for coverage that is more geared towards full coverage that includes final expense policies for their families. With more coverage, they can ensure that their financial responsibilities won’t be passed on to their loved ones without a pot of money to cover them after they pass.

Whether you’re young or old, there’s a life insurance policy that fits your needs. What’s important is that you start early, or at least before you have any serious health problems that can raise your premiums, or worse, put you in the 'uninsurable' category. The worst thing you can do when it comes to obtaining life insurance is to wait until you actually need it.

The first two types of life insurance we'll cover are term policies and whole life policies. The third option is a blended policy that combines the best of both term and whole life. Each of these policies has their advantages, but they’re not all going to be the best fit at every stage of your life. We’ll go through the basics of each so you’re prepared to talk with your insurance advisor about what you think the best step forward is for you.

What You Need to Know About Term and Whole Life Insurance

If you want to get started with life insurance young, a term policy is likely the right option for you. This type of life insurance is essentially geared towards young adults because it’s designed with premature death in mind. It’s also the more affordable option of the three.

Term insurance differs from whole life because instead of ending when your life ends, the policy ends at your chosen date. These policies can last anywhere from 10 to 30 years, and you pick the date based on when you think your family won’t need it anymore. This could be when you think you’ll have all your major financial responsibilities paid off, your kids have moved out, and you’ve saved up enough to create a safety net, or when you plan on switching to a whole life insurance policy.

Term life insurance is also the easiest option to understand because it’s pretty straightforward. If you pass away during the time of your policy, your beneficiary receives the payout. There’s no other value to your policy other than ensuring your loved ones are taken care of in the event of your premature death. 

Whole life insurance is the policy that people tend to think of when they think of life insurance. This policy doesn’t come with a hard end date; instead it covers you throughout the entirety of your life. Whole life insurance is the option that is better suited for adults and retirees because it offers the proper death benefits for your loved ones. 

A whole life insurance policy is permanent, unlike a term policy where you choose your end date. In addition, the rates of your whole life policy will never increase no matter how your health changes over time, and the value of your policy will never go down. 

The third option for life insurance is a mix of the two, often referred to as a blend. With the advantages of both term and whole life insurance, you and your family receive the best of both worlds. With a blended policy, you can create the perfect coverage that meets your higher coverage needs in the short term, while also allowing you to manage your longer term debts and final expenses, all while continuing to protect the people you love.

No matter which type of life insurance policy you choose, what matters is that you’re proactively making an effort to be sure that the people you love are protected in the event that your financial responsibility is put on them in an instant. With a life insurance policy, you can live your life freely knowing that you’ve protected your family and put a plan in place to manage your finances even after your death.

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Category: Life Insurance (1)