You want to protect your family from the unexpected death and ensure that they will be in a good position if you were no longer around. And the solution to that is pretty easy, life insurance. However, what is not so easy is figuring out what life insurance policy will be the best one.
And it doesn’t help when you google this question all you get is a bunch of technical advice written by people who never sold a policy. Or others who think term life insurance is a swiss knife of life insurance. The worst part is most of the websites are simply trying to push a product or company on you. But ask any ethical experienced veteran the question of “What Life Insurance Policy is the Best One?” and you’ll hear “It Depends.”
That is absolutely the right answer! It depends on a whole bunch of factors but primarily on what are you looking to accomplish. There are a whole bunch of different types of life insurance policies with different problems that they solve. If you want to know what they feel free to sharpen up your knowledge by reading this comprehensive article.>>>>>Types Of Life Insurance Coverage.
With that being said, once you identify what it is exactly what you’re looking to get out of your life insurance policy then we can start looking which policy will be best. You see, if you’re looking for passive investment return you may need one type of policy and a whole different one for aggressive active management. Just like if you’re young, you need one type of policy to protect your family and a whole different one once you are over the age of 50.
So with that being said let’s break down the best type of life insurance for each objective:
Best Life Insurance for Affordability: Term Life Insurance
Term life insurance is one of the most popular and absolutely the best steals around when it comes to life insurance. With a term life insurance plan you can secure your family’s future with a fraction of the cost and the ability to buy a large sum of life insurance when compared to other types of life insurance.
What is A Term Life Insurance Policy?
It is a form of life insurance that is designed to provide protection for specified time or length known as a term. The term length can be as short as 1 year and as long as 30 years. During the term period the rate of the plan will be fixed so there won’t be any surprises. This policy will cover the insured during the term and in the event that the death occurred within that term your family would get a payout.
The death benefit would be paid to the beneficiaries of the policy free and clear without any taxes or fees. Now, unlike whole life or universal life plans, a term policy doesn’t have any cash value savings and is designed to provide pure protection at the most affordable rate. All the premiums of the policy are used to buy up protection and nothing else.
Regardless of the length of term, you secure, after the term expires most plans are going to simply renew annually until the age of 95. However, at every renewal, the rate will increase for that year.
Ideal Scenarios for Term Life Insurance
Although most individuals will automatically opt-in for a term life insurance option it is not for every situation but is ideal for most. Being a temporary type of life insurance that is very affordable term is perfect if you have recently got married, had children, secured a mortgage or simply need the policy for short duration.
Term life plan is perfect to cover your family when the kids are underage and you’re still working hard to save up for retirement. It will provide protection during the working years and the idea here is that your need for life insurance will be highly diminished when the mortgage is paid off, the kids moved out and your retirement account has 6 or more zeros in it.
Most people who recently got a 15 or 30-year mortgage almost immediately buy a term life insurance policy for the same amount as their mortgage balance. The reason is that term life is very affordable and will ensure you that your family can have a paid off roof over their head.
Another situation where a term life insurance plan can be a great solution is for business loans and divorce cases. For example, if you are working on securing an SBA Loan, it is quite common for the lender to require you to secure a life insurance policy that will mirror the length and the amount of the loan. The other way is when going through a divorce the party that is obligated to pay alimony and child support will be required to secure the term life insurance plan as well.
Pros and Cons of Term Life
Pros: Term Life offers amazing pricing which enables all American families the benefit of having life insurance. It is also a very simple to understand the policy that provides protection in exchange for the death benefit and you won’t have to read a 50-page breakdown like some other policies.
Cons: Term plans are designed to provide short-term protection and unfortunately they do have an expiration date. So the downfall is that you pay the policy for 20 or 30 years and have nothing to show for it if you’re still alive. This is also a common counter-argument of permanent life insurance plans against term life. Unlike permanent plans, you won’t get any cash value accumulation that you can access in the future.
Best Life Insurance for Lifetime Protection: Guaranteed Universal Life
This is the hidden gem of the life insurance world and many individuals wish they knew about this type of policy before they got sucked into a confusing whole life or other types of universal life plans with promises of getting life insurance and getting rich. So what is this so-called policy? Well, it is known as Guaranteed Universal Life(GUL for short) also as a no-lapse universal life and lifetime term amongst professionals.
This policy offers lifetime protection with a focus on affordability and simplicity. It can’t be compared to anything else because frankly there is no better product for lifetime coverage, for those of us that think that term life is simply not enough
What is a Guaranteed Universal Life Exactly?
It’s a type of universal life insurance plan that has a no-lapse guarantee. In other words, no matter how the insurance company is performing your premium with this policy is guaranteed to stay the same for life. Typically you can select the policy to be available up to age 90, 95, 100 and even age 121.
The policy does have cash value just like any permanent plan but that’s not the focus of this policy so you’ll get very modest accumulation. A guaranteed universal life has one purpose, which is to provide the most affordable permanent life insurance option. In many cases, it can be two times more affordable than a whole life plan. Due to its affordability and simplicity, it is hands down the favorite permanent plan here at InsureChance.
Let’s not forget to mention that it can also be accessed as a living benefit if you have a terminal illness due to the built-in Accelerated Death Benefit Rider. You can also select two different payout options called option A and B. Option A will pay out only the death benefit and option B will pay out the death benefit plus any cash value accumulation.
Who is it for?
For anyone looking to have permanent protection without paying too much. However, this is ideal for individuals who are over 50 years of age with little to no dependents, low debt balance and a concern for taking care of final expenses. You may also be interested in this policy if you want to leave a legacy to the younger generations. It is the best alternative to term life insurance is really perfect for people who are concerned with outliving the term.
Pros and Cons of Guaranteed Universal Life
Pros: Biggest positive of this policy is that it is hands down the most affordable type of permanent life insurance. You can save a ton of money in comparison to a whole life insurance policy if you’re looking for lifetime protection. Another pro is that the premiums of the policy are guaranteed to stay the same no matter how the insurer is doing financially. In other words, even if the market conditions are causing the insurer’s losses it won’t affect your premiums with this policy.
Cons: There are not too many bad things about this policy except for the fact that it doesn’t really accumulate too much cash value but it is also much more affordable than the policies that do.
Best Life Insurance for Investment Returns: Variable Universal Life Insurance
When you think of life insurance for investment purposes a whole life insurance plan may come to mind. However, this couldn’t be further away from the truth and when you really do some digging around you’ll realize that 1% to 2% returns is what you can expect from a whole life plan. Yes, it offers guarantees with premiums, death benefits, and cash value growth but if you’re looking to make serious returns it is not the right policy.
The reason people think of whole life is that every new agent is motivated to push whole life onto all their clients. Now you may be wondering what is the best investment driven type of life insurance and the answer is Variable Universal Life. This is by far the best life insurance product for people that want to get wall street like returns while getting tax-deferred benefits of life insurance.
What is a Variable Universal Life?
A variable universal life was originally created by mixing a universal life plan with a variable universal life. This life insurance policy works just like other permanent life insurance plans that provide a death benefit and cash value but also has sub-accounts for aggressive investing where you can gain a lot while also lose as well.
Typically, with other cash value plans people complain of not having too much leeway with where their money gets invested and that’s why variable universal life is probably the best option. With the subaccounts, you have an ability to diversify your investments with a variety of different funds this is not available with other cash value plans since you are dependent on the general cash value account.
No other policy will provide total flexibility in the coverage amount, payments and investment allocation like a Variable Universal Life. It is also important to note that many of the investment choices are managed by world-class money managers that the insurance companies hire to get them amazing returns. And as you get to enjoy those returns you’re not needing to have to worry about taxes since life insurance cash value accounts are tax-deferred and you can pull the money out via loans. This is probably one of the reasons this is a very attractive option for people who don’t want to get buried in income taxes on their investments.
Who is Variable Universal Life Insurance for?
It is for the individuals who are looking to get the most returns on their money while also enjoy tax-deferred benefits. Most individuals who are inquiring about this policy have already maximized their contribution to a 401k or IRA and are now looking for another investment with tax benefits. Typically, anyone who tells you that you can get rich with your life insurance policy is lying unless they are talking about a Variable Universal Life plan.
You should also be an active investor with a decent based knowledge of how to manage and allocate money. We’re not saying you need to be Warren Buffet but definitely not an amateur because just like there is an upside there is also a downside. If you make a few bad moves you can lose a lot of money. So in essence, if you’re an active investor who is looking for a life insurance policy that lets you get high upside with tax deferral on the benefits that this plan is for you.
Pros and Cons of Variable Universal Life
Pros: The biggest pro of this amazing product is the ability to have sub-accounts which are separate from the general cash value account that you can manage and invest in high performing funds. Being a type of universal life you also get the ability to make changes to your death benefit and premiums. And as your investments grow you’ll have the ability to withdraw those funds tax-free via loans if you need to supplement your retirement or need quick cash for emergencies.
Cons: Because it is a universal life plan with a focus on investments the downfall can be the cost of this policy. You’ll be getting a lot less insurance for your dollar in comparison to a term or guaranteed universal life plan, so if you’re a middle-class American that is trying to protect your family you first might want to get a large face amount term plan before jumping into this one. The other downfall is that you can lose a lot of your hard earned money by making some bad investment calls so if you’re new to investing be sure to consult with an advisor or start with more passive investment products like index funds.
Best Life Insurance for Leaving a Legacy: Survivorship Life Insurance
If you’re in a position where you and your spouse are concerned with leaving some money behind for your heirs or to simply help them pay estate taxes. (if you’re a high net-worth individual) The last thing you want to do it by a term life insurance plan since it has an expiration date and you also want something that would pay out when both people die. Luckily for you, there is a solution and that is a survivorship life insurance plan.
What is a Survivorship Life Insurance?
It can be a whole life or universal life insurance policy that only pays out in the event that both of the insured under one policy pass away. For instance, if either you or your spouse died first there wouldn’t be a death benefit until both of you are deceased. This policy can be used to leverage your money to leave a large inheritance to your kids or grandkids and in some cases leave the money to a charitable organization. If it is for estate planning it can help your heirs pay for any legal fees and estate taxes.
Since it is a permanent plan part of your premiums will go into the savings component of the policy known as cash value where it will grow with interest. Although don’t expect crazy returns like you would with a Variable Universal Life but you will still be able to use that money if there is ever a need. You can also set it up where your beneficiaries will get the death benefit plus the accumulation of cash value by choosing an Option B for the payout.
Who is this policy for?
This is an ideal policy for couples whose primary focus is not providing a death benefit for each other but rather their heirs. This plan will insure two people who are in most cases legally married. Because this policy is designed to provide death benefit when both members die it is important that you either have enough financial liquidity to not need life insurance or make sure that you have a separate policy to pay out to your spouse.
From our experience individuals that buy this policy tend to have a higher net worth and are primarily concerned with leaving more money behind to their family so they can have wealth and use that money to pay for the estate taxes which can be as high as 40% if your total assets are a certain amount. (be sure to check the exemption amount for each year)
You may be wondering why would you simply not get an individual policy on each other and the answer is that it is more cost effective to get two people under one contract. Not only will you save money by going this route but the underwriting can be a bit easier since two lives are involved.
Pros and Cons of Survivorship Life Insurance
Pros: The best thing about survivorship life is that you save a lot of money on the payments due to having two people under one policy. Another benefit is that if you have certain medical conditions it may be easier to qualify since the underwriting is a bit lighter on these policies.
Cons: A disadvantage of this policy is that if anything happens to your spouse and you need to have some money it won’t pay out so you’ll definitely need to make plans for that.
Best Bang for your Buck if you can afford it: Single Payment Life Insurance
In the life insurance industry, the rates are fixed by the law and get determined by your overall qualification and which company you pick. Besides this, there are no veterans or AAA member discounts so you don’t have much wiggle room. And forget about negotiating with the agent they have no power over the pricing besides just looking for which company has the best deal. What we do have in the industry is discount for paying on annual basis or paying the policy up in full or in 10-20 payments. When it comes to this, the absolute steal would be a single payment life insurance policy.
What is a Single Payment Life Insurance?
It is a type of permanent life insurance policy that simply gets paid up in one large sum premium. In other words, you would have a paid-up policy that is locked in for a lifetime. This way you’re essentially guaranteeing that at one point or another your family is getting the money. Because you’re paying the policy one time it is hugely discounted since the insurance company is able to use that money to create immediate returns for itself. Another benefit of this is that you’ll also start getting compounding in your cash value account right away.
Typically there is no cash value accumulation in the first five years since there an agent compensation and all kinds of fees that need to be paid. Most permanent plans start getting cash value growth after 5 years but not single payment life policy. Not only the compounding starts immediately but the growth is faster since there is a bigger snowball to start with.
Individuals who have a lump sum stashed away are always open to considering this type of policy since you can often times get four to five times the amount of the money you invested. For example, we had a client who was a single mom and a real estate investor who wanted to make sure she leaves enough money for her two kids. Most of her cash was tied up in real estate except for $200,000 which we used to get her $1 million dollar paid-up policy. Not only did she just get a five-time multiplier on her money she also never has to worry about making another payment for life insurance. She also is already getting her money growing within the cash value.
Whos is single premium life insurance for?
In reality, it is great for anyone who can afford it because there is no other way to easily leverage your money than with this type of policy. Most individuals who buy this policy are usually retired folks who want to leave as much money to their loved ones. It is also common to buy this type of policy as part of an estate plan in order to help the beneficiaries get everything paid and complete in order to get the assets transferred to them. This policy is also very cost effective since you’re getting a lot more life insurance than your premium dollar.
How to Pick the Best Company?
There are thousands of life insurance companies out there and picking the best one can be a daunting task. However, there is a formula that we use to help thousands of clients secure life insurance with the best company. It is important to keep in mind that the best life insurance company for one individual may not be the best one for you. There are simply way too many factors that are involved in the process. So let’s review each one:
Company Strength
Before you look at anything else you want to make sure that the company you’re considering is one that will be able to pay out claims to your family if you died. This can be easier to do than one may expect since there is a grading system designed by large rating agencies like A.M. Best, Standard & Poors and Moody’s. Each year these agencies will review the insurance companies and assign a grade, just like your school teacher did. In our agency, the rule of thumb is to only work with “A” or “A+” rated insurance companies and skip them if they have anything lower than that. This grade ensures that the company has a substantial amount of cash reserves and strong claims-paying ability.
Besides looking at their grade be sure to check out company’s history so you can learn how long they been around and what type of economic downturns they have survived. As they say, the best performance predictor of the future is past performance. Most of the companies that we work with have been around for 100+ years so technically they should be around in another 100 or more years.
Customer Service
This is usually something that goes unchecked and it shouldn’t. Trust us when we tell you that life insurance companies are knowing to be on extreme ends when it comes to customer service. You’ll either get amazingly great service or the most horrid one. So be sure to check online to see what other clients are saying and in some cases the agent will be able to tell you since we have to deal with insurance companies on the daily basis.
Products
It may be self-explanatory but you definitely want a company that has both great insurance and financial products. Not only is this important when you buy your initial life insurance plan but in the future, you may need to convert your plan into another one and your options will be limited to what that company has to offer. For example, a lot of policyholders have an option of converting their term life insurance plan on guaranteed insurability basis to a permanent plan that the company offers. In this case, it helps to ensure the company has quality permanent life insurance plans available.
Favorable Underwriting
One of the most vital if not the most vital steps in this process is picking a company that has favorable underwriting for you. You see, underwriting is the process in which the insurance company will look at all your factors such as your build, smoking status, family history, driving history and your overall health to assign you a risk class. The reason this is important is that each company will give you a different class based on your factors.
For example, you see an absolute lowest life insurance rate advertised by Metlife and you think you should apply. However, you are an e-cigarette smoker and Metlife would give you a smoker rate which would double or triple your premiums, so would 99% of all other life insurance companies. Now, you would have been better off applying with Prudential since they are the only company that will give nonsmoker rates to e-cigarette users. This can be applicable to all other factors like being overweight, having a family history of cancer, few DUI’s or some preexisting medical conditions. That’s why it is absolutely crucial that you work with a company that gives you the best rate based on all your underwriting factors.
What is the Best Life Insurance Company to Buy a policy with?
Like we mentioned earlier in the article there is really no best life insurance company simply because there are a variety of different situations that different companies are ideal for. Nonetheless, there is one company that in our opinion is just overall well rounded and would be a total win for the majority of the situations. And that company is Prudential! From working with over 60 different life insurers out there we can tell you that no other company comes close to them.
Prudential is a very known company that has been around for over a 100 years now with assets in the trillions. They also happen to have an “A+” rating from A.M. Best, this rating along with their longevity and asset size makes them one of the biggest most reliable life insurers in the world.
They also have a very strong and diverse portfolio of insurance products. You can pretty much get any life insurance product you can think of and ones that we mentioned above. So whether you need an affordable protection, leave a legacy or accumulate some cash value they have a plan for you.
They also have outstanding customer service so when the time comes to make policy changes or simply to ask a question you’ll be greeted with the most friendly and knowledgeable representatives. This is not too common when a company is as large as Prudential is and service functions get outsourced or poorly managed.
But what really makes them the numero uno is none of the factors we mentioned before but their considerations for higher risk cases. For example, they are the only company giving nonsmoker rates to e-cigarette users. They are also very liberal with a history of DUI or reckless driving. In the event of a felony, most companies will turn you down regardless of how long it has been. If you have diabetes, history or heart disease, mental health issues or are dealing with obesity they will try their best to issue a policy for you. Their final rate offers also seem to be fair and they have the highest approval rates out of all the companies we represent. If no other reasons are given this reason alone makes them the best company to work with.
Life Insurance Sample Scenarios
To help you better understand which scenarios call upon certain plans will look at some live examples:
Scenario 1
Josh and Stacy are a newlywed couple who recently graduated college and are starting a family. Together they have an annual income of $80,000 and Stacy is expecting a child in a few months. In addition to that, they recently purchased a home with a mortgage balance of $500,000 and are concerned that if something happens to one of them they won’t be able to pay for it. Because they don’t have too much to spare financially but at the same time need to have coverage they were in a pickle.
Solution: Term Life
By getting a 30-year Term Life Insurance Plan for $1 million dollars on each of their lives they were able to secure their family until the kids are grown up and the mortgage is paid off for little under $100/mo.
Scenario 2
Thomas is a retired fireman who is now enjoying his life thanks to all the hard years of work he put in. He has a paid off home and doesn’t have anyone depending on him for income. He does have one concern and that is to make sure that his final expenses get taken care of and a little bit of money goes to his granddaughter. He has been approached by agents offering final expense but he is in excellent health and final expense plans are limited to $50k of coverage with higher cost.
Solution: Guaranteed Universal Life
Because Thomas is in excellent health he can qualify for a guaranteed universal life and be able to get a lot more coverage so he can cover final expenses and leave a larger amount for his granddaughter
Scenario 3
Jennifer is a 70-year-old senior who through hard work and frugality saved up $500,000 in assets. She has 8 grandchildren and 3 children which she loves dearly. Jennifer always wanted to leave each one of them $100,000 so they can do something great for themselves but she is a bit short.
Solution: Single Premium Life
By exchanging her $500,000 for a paid-up policy she will be able to secure about $1.5 million in life insurance which will be more than enough to fulfill her desire.
Scenario 4
Ian is a self-employed individual who makes $200,000 per year and has an aggressive investment allocation strategy. He has already maximized his Roth IRA contribution and is wondering of any other tax advantageous investments with great returns.
Solution: Variable Universal Life
Luckily for him, a variable universal life plan will offer him great market returns with tax deferral benefits of life insurance.
How to get the Best Rate on your life insurance?
If you like it save money than we got a few industry tips for you that will help you achieve that. Life insurance rates are set in stone but you can do what the pros do to find the best rate. So let’s see where you can save:
Shop Around– The most cost-effective tip you can follow is to make sure that you check rates with all the top life insurance companies which are easy when you work with an agency like ours. It is quite common for clients to overpay by $100’s of dollars for the same exact plan they could have gotten with another reputable company.
Prepare for the Exam– When applying for life insurance and completing the application, the company will also want you to complete a medical examination. During the examination, the nurse will check your builds, your blood pressure and take a blood/urine sample. This will then get sent to the lab for evaluation. If any of your levels are out of range you can end up paying a much higher rate. So make sure that you eat healthy, drink plenty of water and avoid alcohol a few days before your exam.
Use Cover Letter-This one is definitely one of our favorites and most used tactics. Most agents are too lazy to write a cover letter for their clients but a good cover letter can entice the underwriter to give a better risk rating. A cover letter provides details about you that can’t be included in the application and adds personality to your application. Be sure to work with an agency that provides this service.
If you follow these helpful pointers you should be able to save a ton of money on your life insurance regardless of the type of life insurance product you buy.
Work with Us!
There is no single life insurance policy that is best for everybody. You simply need to ask yourself what exactly do you want to accomplish with a life insurance plan. Once you figure that out the rest is easy and you simply need to pick a policy that can help you meet that goal.
If you actually ended up reading the entire article, I’d like to say that you may now know more about life insurance than most professionals in the industry. You also should have a pretty clear idea of which plans sound more suitable for you and are probably ready to start shopping around for life insurance. The best part is you are actually at the right place, here at InsureChance we work with over 60 top rated life insurers to get you the best plan and with the lowest rate.
In addition to that, we provide friendly lifetime support to all of our clients and no pressure sales process. Our agents are extremely knowledgeable and experienced so you get rest assured that they will navigate you through the entire life insurance shopping process.
