OCALA, FL — When it comes to buying life insurance, you may be scratching your head as you look at all the options. Before you choose one type over another, you should ask yourself two questions: “How much can I afford in premiums?” and “Which insurance plan will benefit my beneficiaries the most?”
Basically, there are two types of life insurance; term and permanent.
One fact that illustrates the difference is this: “Ninety percent of all term policies never pay a death benefit,” according to Kevin McDonald, whose agency offers life insurance plans in Ocala and the Villages. “The reality is if you have an intention of providing a life insurance benefit to your family at the time of your passing, there’s always a reasonable conversation to be had for the need for permanent insurance.”
What Is Term Life Insurance?
There are two types of term life insurance:
- Level Term Life insurance maintains the same premium throughout the term of the policy. The cost is calculated according to the client’s age and health and by the length of the term.
- Annual Renewal Term Life insurance can be, as the title says, renewed every year, for a limited number of years. The premium will probably increase with each renewal.
Thanks to money whiz Suze Orman, term life has increased in popularity over the last few years. Unlike their permanent counterparts, term life plans do not hold any cash value. Yet, Orman favors this type over permanent life insurance, as do many other financial resources. Let’s see why.
Myinsurance.com lists the following features:
- Term life generally carries lower premiums, especially for people under the age of 50 and in good health.
- Term life plans are available for terms of one to 30 years.
- Benefits are paid upon the passing of the policy holder, if the passing occurred during the active term.
- Term life policies offer death benefits only.
- Most term life policies come with a renewal clause.
What Is Permanent Life Insurance?
There are three types of permanent life insurance:
Whole life. Like term insurance, a whole life policy locks in the same monthly payment over the life of the policy. However, whole life is more expensive and generally includes high fees and commissions. Most whole life policies don’t start to build a decent a cash value until their 12th or 15th year.
Universal Life. This is a flexible type of insurance that offers low-cost protection and includes a savings element. You can review and change various aspects of the policy at any time, and you can use the interest from savings to help pay your premiums. Unlike whole life, universal allows the cash value of investments to grow at a variable rate that is adjusted monthly.
Variable Life. This is the most expensive type of permanent life insurance, but it allows you to allocate funds into a portfolio of stocks, bonds and money market accounts without being taxed on your earnings. Because they are considered investment risks, variable plans are regulated by federal securities laws. With variable plans, you can’t withdraw funds from the cash value during your lifetime.
Features of Permanent Life Plans:
- Premiums remain the same over the years.
- Premiums are higher than term life.
- Your agent will invest the money in stocks, bonds or a money market account.
- You can cash in the policy or borrow against it.
- Part of the money goes into a savings program.
- The longer the policy is in effect, the higher its cash value will be.
- The gain is tax-deferred.
- Permanent Life policies carry extra fees and commissions.
Life Insurance Rate Quotes for Ocala
What’s the right life insurance plan for your needs? Sorting through the options can be complicated, but the McDonald Agency, which has offices in Ocala, the Villages and Summerfield, can help you find the life insurance plan that is right for you. To request information or a rate quote, call (352) 622-2333.
ABOUT THIS ARTICLE: This website (themcdonaldagency.com) is not intended to provide specific insurance advice for any individual or business entity and should not be relied on for such advice. Persons seeking insurance advice should contact an Ocala insurance agent by e-mail or call (352) 622-2333 to receive advice that takes individual circumstances into account.