What Type of Life Insurance Do I Need?

What Type of Life Insurance Do I Need?

When it comes to Life Insurance, there are 2 general types: term and permanent (or whole life) policies.

Term insurance, as the name implies, lasts for a specific number of years. You can pick the length but if it passes and you’re still alive, the policy terminates. Permanent life insurance lasts your whole life – as long as you’re paying your premiums regularly.

All things being equal, term insurance will be the cheaper option.

Your specific situation would influence the type of policy you’d need but for most people, term life insurance is their best bet.

Why? Think about what prompted you to purchase insurance in the first place. If you’re like 90% of the people we talk to, it’s because you’re starting a family, buying a house, or undergoing some other major life event.

In that case, your greatest need for life insurance would be when you’re still paying off the mortgage and your kids are still young – before they’ve found their own feet and become independent. If that’s the case, then why saddle yourself with paying insurance premiums until the day you die when you only really need it for that 20-30 year danger zone?

Another benefit to term insurance is the flexibility. You can choose policies that last 10, 20 or even 30 years. If you change your mind, you can always switch it out. Most policies come with a guaranteed renewal for another 10 or 20 years at a fixed price regardless of your health at the time. Many of them are convertible as well. Meaning you can convert them into permanent policies if you want.

That being said, there is a time and a place for Permanent Life Insurance as part of your overall financial plan. There is an investment component to it and it can be used as a vehicle for building and passing on wealth.

How much term insurance do you need?