Understanding Life Insurance | Find the Best Policy for You

Understanding life insurance, if you need it, and what type of life insurance is best for you is incredibly important. We’re here to cover the basics and help you get a better understanding of your options in regard to life insurance plans.

Do You Need Life Insurance?

If you’re trying to determine whether or not you need life insurance, the answer varies depending on the person. Generally, someone without family or other dependents who rely on your income will probably be okay without life insurance. On the other hand, life insurance is highly recommended for anyone who does have dependents, including a spouse and children that rely on your income to pay the mortgage, bills, and other regular expenses.

Understanding Different Life Insurance Plans

There are several different types of life insurance. We explain the different types below and cover their pros and cons.

Term Life Insurance

Term life insurance is typically the most affordable life insurance option. Term insurance covers and individual over a set period of time and offers pure insurance, meaning that if the covered individual were to die during this period, the chosen beneficiaries would collect the face value of the benefits.

Pros: Affordable, simple, short-term option


Cons: Premium isn’t locked for life, no savings or investment component

Whole Life Insurance

Whole life insurance, which is a popular form of permanent life insurance, differs from term life insurance in a couple ways. For starters, as the name suggests, whole life insurance covers an individual for the duration of their lifetime. One big advantage of whole life insurance is that the premium remains the same throughout the lifetime of the policy, even as the insured individual gets older or experiences health issues. Finally, whole life insurance is also referred to as cash-value insurance because part of your premium is set aside and can grow tax-deferred.

Pros: Premium stays the same for lifetime of policy, tax-deferred savings component


Cons: Lack of flexibility

Variable Life Insurance

Like whole life insurance, variable life insurance is a permanent life insurance option that has offers both a death benefit along with an investment component. The difference is that variable life insurance policies are not fixed, and that the investment component of this type of insurance allows for a portion of the premium to be invested and therefore grow or decrease with the market.

Pros: Better investment opportunities allowing for growth


Cons: Higher risk

Universal Life Insurance

Universal life insurance is similar to whole life insurance in the fact that it provides a death benefit along with a savings element to allow cash to grow tax-differed. The difference is that universal life insurance provides the flexibility to alter the premiums, death benefit, and savings component if needed by the policyholder.

Pros: Flexibility, savings component


Cons: Higher cost, lower growth possibilities

Universal Variable Life Insurance

As you might guess, this life insurance option combines universal and variable life insurance. The policy holder has the ability to make adjustments to their premium, savings component, and death benefit, but also has the ability for the cash value portion of their premium to be invested.

Pros: Flexibility, investment opportunities


Cons: Higher cost, higher risk

How to Choose a Life Insurance Policy

It can be a little overwhelming trying to figure out which option is right for you. And different policy types definitely make sense for individuals in different situations and stages of life. Insurance Designers of America can connect you with some of the brightest insurance specialists across the nation.