Life Insurance Buyers Guide
While you may think you know all there is to know about life insurance or you may be completely in the dark when it comes to life insurance, at Bender Advisors we believe our life insurance buyers guide will be very helpful. Our aim is to help our customers find a balance between low cost and high quality. In consideration of this, we offer the largest selection of carriers and are committed to selling only policies that we would sell to our own family members.
There’s a huge difference between finding a life insurance policy and finding the right life insurance policy. You can go almost anywhere to get a policy, but is it the best to meet your needs and goals, or are you being sold a policy just for the sake of selling an insurance policy? Who can you trust to give you the lowest rates and be honest about it? Many of these questions go through the minds of thousands of customers every day when shopping for life insurance.
Term Life Insurance or Temporary Life Insurance
When it comes to life insurance, term life insurance meets that balance of low cost and high quality. Many of these policies come with available riders (additional benefits) and offer living benefits to help you access the benefits of your policy if you become terminally or critically ill and have less than 1 or 2 years to live.
Term insurance is also one of the simplest forms of insurance. Straightforward and easy to understand, term life insurance gives you the protection you need for a defined period of time (up to 30 years, in some cases) without many of the costs associated with other types of life insurance.
Another way to use Term Insurance is to purchase a decreasing term that will match the decreasing balance on your mortgage loan. Where as for your life you would want a level death benefit when using a term policy to cover the balance of a mortgage upon death you would want a decreasing term or death benefit.
Whole Life Insurance or Permanent Life Insurance
Whole life insurance is a popular option for many people when it comes to securing their family’s financial future. Since it covers the insured for his or her entire life instead of for a limited period of time, whole life is not the most affordable life insurance option. Although it is more expensive, whole life does offer a way to accumulate cash value. And, in some cases with mutual life insurance companies, dividends are paid out in the form of additional face value. This has been called Infinite Banking or the Family Bank.
While term life insurance is similar to “renting” life insurance, whole life insurance is similar to buying an asset, as it can increase in value over time and belongs to you until you die. Many will say that Whole life insurance should only be considered after you have maxed out your contributions to retirement funds such as 401(k)s and IRAs. We do not believe that to be the case. Do not forget with Whole Life your cash value is guaranteed while your 401(k) is 100% risk and subject to market crashes. We suggest you speak with one of our advisors to explore your best options.
Universal Life Insurance
Universal life is a more complicated life insurance product that mimics both term and whole life. When you pay the premium for your policy, part of the premium is used to cover the cost of insurance and the other portion is placed into a cash account. As the cost of insurance increases year over year, the growth in the cash value account helps offset the increase in the cost of the coverage. In most cases, universal life policies offer a guaranteed minimum growth rate of around 3% on the cash account, which helps ensure that the money in the policy can be used to pay on the rising cost.
Many universal life policies (guaranteed universal life) act like a term life insurance policy, with a greater focus on level premiums up to age 121 and less focus on the cash value accumulation. Because of this, we see universal life policies being purchased more by older clients who want coverage for the rest of their life and aren’t concerned about growing their cash value.
Guaranteed Issue Life Insurance
Guaranteed issue life insurance is a policy created largely with older consumers in mind, but some companies offer these policies to people of all ages. These policies are more expensive than other forms of life insurance and carry a much lower death benefit (usually up to $25,000). Underwriting for these policies involves no medical exam and no medical questions, and the policies are approved quickly.
People who have medical conditions that make them ineligible for more standard forms of life insurance can often qualify for this type of policy. The downside to a guaranteed issue is that the total amount the policyholder pays in premiums can end up being more than the amount of the death benefit. So, we advise people to consider other insurance options before buying a guaranteed issue life insurance policy.
Accidental Death Insurance
The least expensive life insurance policy you can buy is an accidental death and dismemberment (AD&D) policy. Similar to a guaranteed issue life insurance policy, these policies require no medical exam or medical questions because they only provide coverage for death by accident (not a health-related death). Accordingly, the price for an accidental death policy is usually the lowest of all insurance policies.
This type of policy is recommended especially for college students and people who are at greater risk of being involved in an accident, such as frequent travelers. Many accidental death insurance policies also offer double the payout if the insured’s accidental death occurs on a commercial carrier, such as a plane, train, or bus.
Return Of Premium Life Insurance
This is one of the least-talked-about life insurance policies on the market. Many life insurance agents do not talk about this rider but we do at Bender Advisors A return of premium term insurance policy operates just like a normal term life insurance policy — except at the end of the policy, you get all of your money back. More traditional term life insurance policies offer the same coverage at a lower cost, but you don’t get your money back.
According to Insurance company statistics close to 90% of Term Insurance policies go unused. So you have four choices. 1. Not protect 2. Risk wasting your money 3. Buy Permanente Life Insurance 4. Purchas a Return of premium policy. At Bender Advisors we will show you how all the policies compare empowering you to make the best decision for your goals.
Since the insurance company doesn’t keep your money when a return of premium life insurance policy expires, these policies are priced more aggressively to ensure that the insurance company’s costs are covered. Return of premium policies act as a “forced savings account” and provide a lump sum payment of the premiums at the end of the term.
Instant Issue Life Insurance
As the technology age advances, the ability to instantly write a life insurance policy becomes more commonplace. With instant issue life insurance, you can request a quote in the morning and have your policy in place by dinner (and in some cases, even sooner). Using consumer reports and databases across the U.S., life insurance companies are able to analyze your risk more quickly and underwrite your policy instantly.
This is often not the most affordable life insurance option. However, as the technology evolves and improves, the cost for this type of life insurance is becoming lower. Instant issue is a great option for those who need a quick life insurance policy for legal reasons or for securing a business loan.
No Medical Exam Life Insurance
No medical exam life insurance is typically a life insurance policy that provides coverage for less than $300,000 to $500,000 (depends on the insurance company) without a physical. Underwriting for simplified issue policies focuses more on electronic records and a few health questions to make the approval decision.
This type of life insurance policy is slightly more expensive than fully underwritten policies.