Last Updated: 06/04/2018
Congratulations, you’ve made it to retirement! After all your years of hard work, you finally get to relax and spend some time doing things for yourself.
But you just realized – you don’t have life insurance, and it’s probably a good idea to obtain some coverage. Which type of life insurance do you choose?
In this article, we’ll discuss the different types of life insurance, and which option would best fit your situation.
Quick Article Guide:
- How Much Coverage Do You Need?
- How Long Do You Need Coverage For?
- Term Life Insurance
- Whole Life Insurance
- Guaranteed Universal Life Insurance
- Questions? We Can Help!
Before we get into the different types of coverage, we must first determine how much coverage you need. Typically at retirement age, most folks who are shopping for life insurance need enough coverage to settle their final expenses, burial costs, or any debts they may leave behind. If you no longer need to provide a source of income replacement to your spouse, $100,000 of coverage or less is usually enough.
If you have outstanding debts, a spouse who depends on your income, or if you’re looking to maximize your pension, you’ll want to take these obligations into account when purchasing your policy. Most people in these situations purchase enough coverage to settle their debts, or replace the income their spouse would lose if they were no longer around.
Even if you don’t have a lot of debt or expenses to cover, you may want to purchase life insurance to leave money behind to a family member. Leaving some college money behind for your grandchildren after you’re gone is always a well-appreciated gift. You can also use your policy’s death benefit to donate to your favorite charity.
When purchasing any life insurance policy, you also want to consider how long you need the coverage for. Do you need life insurance for the rest of your life for burial costs, or only for a few years until your major debts or mortgage have been paid off? Determining how long you’ll need the insurance is just as important as determining the amount of coverage you need.
You may also want to consider layering more than one type of coverage. As an example, we recently worked with a client who purchased a 10-year term policy for $150,000, and a $100,000 permanent policy. This will provide his spouse with enough coverage to settle their mortgage. Once the mortgage has been paid off in about 9 years, his spouse will still have $100,000 of coverage to settle his burial costs.
If you’re unsure of how much coverage you need or the duration needed, please don’t hesitate to contact us and speak with one of our licensed independent agents.
Now that we’ve covered the basics, let’s move onto the different types of policies!
The most affordable out of the three types we’re talking about today, term life insurance is insurance that gives you coverage for a certain amount of years (the term) – either 5, 10, 15, 20, 25 or 30 (depending on what the company offers).
Essentially, it is temporary coverage.
Say you have a mortgage. Most mortgages are 30 years or less, similar to the term lengths available. Purchasing a term policy to protect your mortgage, and either letting the term end or converting a portion of it to permanent coverage after your mortgage diminishes is a great way to ensure you and your family are protected.
In short – if you are looking for affordable coverage for a certain amount of years and don’t mind taking the medical exam, term insurance is probably is the perfect choice for you.
But what if you want permanent coverage?
Whole life insurance is the most common type of permanent coverage, but not necessarily the best. With these policies, you are not required to take a medical exam – but this convenience comes at a cost. If you don’t mind paying a little extra to avoid the exam, and you’re in average health, this may be the right pick for you.
Keep in mind, whole life insurance costs more than other forms of permanent coverage and quite a bit more than term insurance. Any permanent policy is going to cost more than temporary policy, just due to the duration of coverage. Not taking the medical exam also adds to the cost, because it requires the life insurance company to take more of a risk when insuring you.
There are two types of whole life insurance: traditional whole life and guaranteed issue life.
With traditional whole life, there is an opportunity to build up a small cash value, but you must be in average or better health for your age group. With guaranteed issue insurance, there are no health checks or questions, and these policies are available to anyone between the ages of 50 and 80, regardless of their health. If you’ve seen celebrities promoting life insurance on TV, they are likely advertising a guaranteed issue policy.
To avoid the health screenings, guaranteed issue policies must impose a “waiting period” during the first two years of the policy to prevent people from buying their life insurance while on their deathbed. If you pass away from any type of medical issue during this two-year period, your dependents/beneficiaries won’t receive the full payout from your policy, but they will receive all of the premiums you’ve paid plus interest.
In general, if you’re in good health, we don’t recommend guaranteed issue – it’s smarter to purchase a policy that will give you full coverage as soon as you make the first payment (such as traditional whole life, guaranteed universal life, or term life). But if your health is to the point where you’ve been declined by multiple life insurance companies, guaranteed issue insurance might be your only option.
Last, but certainly not least, we have Guaranteed Universal life, also known as GUL.
This type of life insurance is a hybrid of term and whole life – instead of holding the policy for a certain number of years like term life insurance, the policy is in effect until a certain age – such as 90, 95, 100, 105, 110, or even 121. Since the average lifespan in the United States is about 79 years old, you’re essentially getting permanent coverage, but the cost is a lot cheaper than whole life.
GUL is a great policy for retirees that need to maximize their pension plan, leave money behind for an inheritance, protect their estate, ensure that their spouse has money to live on when they pass away, or to cover any burial costs or medical bills that are left behind.
Clients who want permanent coverage but don’t want to pay the cost of whole life typically opt for guaranteed universal life instead. In addition, GUL coverage usually starts at $100,000, as where the most whole life policies only offer $50,000 of coverage or less.
If you are in average or above average health and want permanent coverage, we almost always recommend guaranteed universal life insurance over whole life insurance. While most GUL policies require a medical exam, it will save you considerably in the long run. The free medical exam only takes about 30 minutes and the practitioner will come to your home or office. No need to leave the house or go to the doctor’s office!
This is usually the best option for anyone who needs to leave more than $50,000 behind for estate planning, an inheritance, or to maximize a pension.
Still unsure of which life insurance policy is the right one for you? Give us a call!
At Term Life Advice, our agents do not have sales quotas to meet, we’re just genuine people who want to match you with the best life insurance company possible. We work with over 60 top-rated companies, and have no doubt that we can find the best company for you.
If you would like to receive an accurate quote based on your age and health, as well as which type of policy and amount of coverage you should choose, give us a call. Toll-free, no obligations: 855-902-6494.
Our services are completely free, and there is no cost to apply for coverage. Give us a call today, or you can request a free online quote below to compare rates from more than 60 life insurance companies in less than a minute.