When deciding which type of life insurance product to purchase we often start by asking ourselves, “what can I afford?” and “do I qualify?”. There are a number of things that differentiate one product from another, but it is important to remember that the most beneficial aspect of any life insurance product is the death benefit protection paid to our families.
In this episode of Money Script Monday, Adam explains the benefits and considerations of the four main life insurance options available.
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Video transcription
Hello, and welcome to another episode of Money Script Monday. My name is Adam Reyna and I'd like to thank you for attending.
I'm really excited to talk about today's topic because really, we're going to talk about a spectrum of insurance here.
And really, what we want to boil it down to is figuring out what type of policy is the right fit for you.
Before we get into that, I want to just mention what insurance really is. We want to look at insurance for the protection side of things.
I know a lot of people when you're shopping insurance, the most important part is, "Does this fit in my budget?" and "Am I going to be able to afford it?"
At the end of the day, we want to know that our families are taken care of in the event that we're no longer around.
We always want to think about insurance as the benefits, the death benefit that's provided to your family.
We'll talk about a couple of different ways to get that protection and also some added benefits as well.
So, if you'd really like to see some heartwarming stories about what insurance has done for families when they lose a loved one, go ahead and click down below.
There's a link below at lifehappens.org, some really good videos, some good reminders of what we need to do with our insurance policy.
With that said, let's get into it here.
Term Insurance
The first type of insurance we're going to talk about is probably the most commonly known, and that's your term insurance.
There is a great fit for term insurance for maybe some younger families, maybe for someone who cannot afford a large premium right off the bat.
Or, someone who only needs coverage for an extended period of time, for about 30 years, 20 years, 10 years, any really duration in between.
What we did here is we ran some premiums, we ran some quotes for a 45-year-old male in good health.
As you can see, your term's going to have the lowest premium out of any of your four options here. But one thing that I do want to point out is that if you live out to age 85, a lot of times people outlive their coverage.
Again, it's a good short-term insurance that you want to get enforced to protect your family.
One thing you might want to consider, talk to your insurance agent about, is getting a convertible term, because a lot of times you can get the cheap term in place now and convert to one of these other options.
With that said, we'll move on to the guaranteed universal life, the GUL.
Guaranteed Universal Life Insurance
As you can see, there's a lock emblem there because this has a guarantee.
You lock in that death benefit with a guaranteed premium and a guaranteed death benefit that will be level out well past your life expectancy.
Of course, you get what you pay for.
This one's going to have a little bit higher premium, but if you notice, it's going to extend much past your life expectancy.
Typical life expectancy right now is about age 85, so this covered is going to go all the way out until age 100.
So again, longer period of coverage, a little bit higher premium, but very important to lock in that death benefit now.
Whole Life Insurance
Next, we have our whole life insurance. As you can see here, it's a very balanced type policy.
You lock in that death benefit with a guaranteed premium and a guaranteed death benefit that will be level out well past your life expectancy.
You get your protection but this one has added benefits of earning some cash value as well.
You’ll notice here, to get the million-dollar death benefit, again, we're going to have a higher premium about 1,428 a month.
You not only have a higher than a million-dollar death benefit at age 85, but you're also going to have a good amount of cash value.
Work with your insurance agents, really understand how these work because you, kind of, kill the two birds with one stone with these next two types of policies.
You have cash value that you can use for large capital purchases, potentially some retirement income and you're going to have a guaranteed death benefit on your whole life policy.
A really good one there for a little bit higher income earners, someone who's a little bit more capable of taking care of some of those monthly obligations.
Indexed Universal Life Insurance
Then, finally, we've got our index universal life, which I call the Cadillac or the Ferrari of insurances.
If you notice to start off with the million dollars’ worth of coverage, a little bit higher premium, it actually has about over $36,000 a year is what you would pay as a 45-year-old male for a million-dollar policy.
Work with your insurance agent on this type of policy because there is a very specific way you want to get it set up and you want to make sure you use it correctly.
If you do use it correctly, let's take a look at the death benefit at age 85.
Believe it or not, it's over $9 million, because it's going to be increasing as your policy matures.
Let's take a look at the cash value.
Similar to whole life, also has cash value and a death benefit, but the IUL is going to have a lot more growth.
That's why you see the picture of the tree there. A lot more growth, about $8.75 million with the cash value at your age 85.
Again, that cash value can be used for a lot of different things, but a very, very beneficial product.
There's going to be different types for different situations.
Work with your trusted advisor and your agent to decide whether you need a short term policy, something guaranteed that's permanent, or like we talked about, some cash value.
So again, I appreciate your time and at the end of the day, let's just always make sure that we're protected using one of these different types of policies. And I appreciate your time. Thank you.
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