Your Guide to Personal Life Insurance
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When it comes to selecting a life insurance policy that best fits your needs, there are a variety of factors to keep in mind. Not sure where to start? Check out our insurance team’s policy guide to help you better understand the options available to you and your family.
Whole Life Policy
Summary
This policy remains active for the policy holder's lifetime and is often used to pass money on to the next generation with tax advantages, to fund trusts, or to help keep an estate liquid. The earlier it’s purchased, the lower the premium payments will be.
How it Works
The policyholder makes contract-required premium payments and the company will pay out the death claim upon death or policy maturity—whichever comes first.
Term Life Insurance
Summary
This type of temporary life insurance is the most affordable and can help fulfill short-term needs. This time-bound insurance could be aligned with specific debt, such as a mortgage or your children’s education.
How It Works
The length of time you want to receive coverage is called a term. A life insurance company determines term lengths you can choose from. Five, 10, 15, 20, 25, and 30 years are common term options.
Universal Life insurance
Summary
This flexible option allows the policyholder to adjust premiums and death benefits. While there is a policy for almost everyone, the cost of insurance (COI)--the minimum amount of a premium payment required to keep the policy active—will vary by policy based on the policyholder’s age, insurability and the insured risk amount. As the insured ages, the insurance costs increase.
How It Works
These insurance premiums have a COI amount and a savings component known as the cash value.
Indexed Universal Life Insurance
Summary
Indexed universal life insurance is lifelong and includes a cash value component in addition to a death benefit. This insurance comes in many different forms, including your basic fixed-rate policy and variable models that allow the policyholder to select various equity accounts in which they can invest.
How It Works
An indexed universal life insurance policy allows the policyholder to allocate cash value amounts to either a fixed- or equity-indexed account. Indexed policies offer a variety of popular indexes to choose from, such as the S&P 500 and the NASDAQ 100.
Final Expense Insurance
Summary
This whole life insurance policy has a small death benefit and can be easier to secure approval for as compared to other policies. It is also known as funeral insurance, burial insurance, simplified issue whole life insurance or modified whole life insurance.
How It Works
Once you have your policy, the premiums cannot increase and the death benefit cannot decrease. Unlike a term policy, a whole life policy does not expire when you reach a certain age and accumulates cash value that you can borrow against. However, any unpaid loans that exist when you pass away will reduce the amount of money your beneficiaries receive.
For general life insurance questions, check out our Life Insurance Explained blog post. Determining the right type and amount of insurance for you should be discussed with a life insurance expert. Members 1st Insurance Services Powered by Iscential has licensed, experienced agents ready to help you make that important decision. Contact them to explore your options today.
Insurance products are not federally insured and are not obligations of or guaranteed by Members 1st FCU, Members 1st Insurance Services, or any other affiliated entity.
