When it comes to life insurance, you have two primary options: term life insurance and permanent life insurance. Term insurance is fairly straightforward and offers affordable life insurance coverage for a specific amount of money over a specific period of time. Permanent life insurance, however, comes in many shapes and sizes. While its primary purpose is to provide a financial benefit upon death of the policy holder, cash value withdrawals could potentially be used for college expenses, supplemental retirement income and other emergency financial needs. Permanent life insurance also provides additional options and features that aren’t usually associated with term coverage.
Term insurance serves a purpose for those whose primary need is cost-effective protection against an unexpected death. However, if you outlive your term contract, purchasing another later in life will likely make the premiums more expensive. If you’re coming to the end of your contract, you may be able to exercise an option to convert to permanent insurance coverage without additional medical questions. This can allow you to still provide a benefit to your loved ones in the event of death and also leverage the additional benefits of permanent life insurance.
Thrivent Financial suggests learning more about the following three types of permanent life insurance coverage and the benefits each can provide: whole life insurance, universal life insurance and variable universal life insurance.
Whole life insurance provides coverage for the rest of your life, without needing to renew the policy. Your premiums will remain consistent throughout the lifetime of the policy and will build cash value that you could potentially use for various other financial needs. These can include paying for a child’s college, using it for retirement income or saving it for a life-event purchase like a second home or fun vehicle.
Universal life insurance provides lifetime coverage and a cash value account like whole life insurance, but allows you flexibility in making premium payments. The policy often provides a broad range of payment options and a maximum and minimum premium. Within the policy’s guidelines, you can choose how much and when you pay your premiums. Reducing payments will affect the cash value of the policy and possibly the death benefit, but will allow you payment flexibility.
Variable universal life insurance offers lifetime coverage while taking advantage of the payment flexibility of universal life coverage with an added investment option for your cash value account. Most policies provide several investment options that are professionally managed to pursue a stated objective. Investment choices can range from conservative to aggressive with many options in between. Remember that with any investment, there is risk involved including loss of principal that can affect the death benefit and cash value. These types of policies are an option for those who are looking for more investment flexibility in addition to the death benefit.
Additional types of polices exist that can be of service to you and your family, but these three represent the most popular plans currently available.
Life insurance contracts can be complex, and you should use a trusted financial professional to ensure you understand exactly what you’re purchasing. However, life insurance can be one of the most generous gifts you give your family, ensuring they’re taken care of after you’re gone.
Thrivent Financial is a financial services organization that helps Christians be wise with money and live generously. As a membership organization, it offers its nearly 2.4 million member-owners a broad range of products, services and guidance from financial representatives nationwide. For more than a century it has helped members make wise money choices that reflect their values while providing them opportunities to demonstrate their generosity where they live, work and worship. For more information, visit Thrivent.com/why. You can also find us on Facebook and Twitter.
This article was prepared by Thrivent Financial for use by Tri County Area representative John Lauer. He has offices at 3821 Main Street in Morgantown and can also be reached at 610-286-5986 or John.Lauer@Thrivent.com.
