Compare Life Insurance

You should consider your overall health, coverage length, average costs of a policy, death benefit amount and plan flexibility when comparing life insurance policies. Your lifestyle determines many of these factors.

For example, if you have young children, you’ll likely want a death benefit amount that will financially protect your children while they’re dependents. You may consider a term life insurance policy with a term length of at least 20 years and a high death benefit in case you suddenly pass away.

If you’re an older adult with no children and looking to build cash value as you near retirement, a whole life insurance policy may better suit you. A whole life insurance policy is a permanent type of life insurance that offers a cash value component.

Choosing a policy with an affordable premium should be priority. According to the Insurance Information Institute, no matter what policy you choose, if you stop paying your premiums your coverage could lapse. If you pass away while your coverage is lapsed, your insurer is not required to pay the death benefit to your beneficiaries. This would render your policy unusable.

Term and permanent life insurance policies are very different. The two key differences are the term lengths and cost.

With a permanent life insurance policy, you have lifelong coverage, but the premiums are more expensive. With a term life insurance policy, you have coverage for a limited time, but the premiums are typically more affordable.

Keep in mind that the cost of life insurance premiums fluctuate depending on a wide range of factors.

When it comes to comparing the four permanent life insurance policies, the differences aren’t as stark. In fact, most are similar in functionality. But this isn’t to say they’re all identical. You should still carefully consider each type.

There are two types of term policies — level term and decreasing term.

Level term policies have a set death benefit amount and premium rate, whereas decreasing term gradually decreases the premium rate and death benefit until the term ends.

The most popular type of term policy is level term, according to the Insurance Information Institute.

Because level term policies are most common, we will use this type to compare to permanent policies.

The four permanent policies being compared are whole life, universal life, variable life and indexed universal life.

The three biggest factors when comparing term and permanent policies are the coverage length, premium costs and the cash value component.

Term life has coverage for a limited time, which is determined when you purchase the policy. Typically, the term length options are 10, 20 or 30 years. Term policies do not build cash value. If you’re a healthy 50-year-old, your monthly premium for a term policy could be as low as $30.

All permanent policies have lifelong coverage and a cash value component. Some permanent policies can be more flexible than others. The premium rate for permanent policies can be up to 15 times more expensive than term life premiums.

Term is the most popular type of life insurance overall and whole life is the most popular type of permanent life insurance, according to the Insurance Information Institute. Both have a fixed premium and death benefit amount, and both have options that don’t require a medical exam.

The difference between term and whole life insurance is the coverage length, cost and cash value component. Whole life offers lifelong coverage with accumulating cash value, which makes the premiums more costly.

Term and universal life insurance policies are very different. Universal life insurance has a flexible premium and death benefit, meaning you can alter the amounts. Universal also provides lifelong coverage with a cash value account. Lastly, it requires a medical exam. This means if you have a threatening health condition, it may be better to consider other options.

Term life insurance doesn’t always require a medical exam and is more affordable compared to universal life insurance. Your premiums and death benefit amount are fixed, meaning they cannot be changed. With term life insurance, you only have coverage for a set period, not lifelong.

Variable life is more complex than term life by having an investment risk. Your cash value, premiums and death benefit amount are linked to the performance of investments. You should only consider variable life insurance if you have strong investment strategies. Both term and variable life have a death benefit for your beneficiaries, but variable life has more of a focus on building your cash value.

Variable life is also known to be more expensive compared to term life, and it requires a medical exam. If you’re looking to have more control over your investments and potentially have higher cash value growth — variable life insurance could be a good fit for your goals. If you only want a simple and more affordable life insurance for a set period — term life insurance would be easier to manage.

Indexed universal life insurance is more flexible compared to term, but there is potential stock market risk. Indexed universal offers lifelong coverage, and you can adjust the premium and death benefit amount. There is a cash value component that is linked to the performance of a market index, like S&P 500.

If performance is good, your cash value could grow exponentially. However, there is a cap on your cash value earnings and returns aren’t guaranteed. Indexed universal life insurance is also likely to require a medical exam.

Term life offers coverage for a set period, typically up to 30 years. The premium and death benefit are fixed. There isn’t a cash value component, which means there is little to no risk with term life compared to indexed universal. You’re also likely able to find an option without a medical exam with term life. Because term life insurance is simpler, it will be more affordable compared to indexed universal life insurance.

There are two core similarities between the four main permanent life insurance types. They all have lifelong coverage with a cash value component.

The biggest differences are whether they have a fixed or flexible premium and death benefit amount, how their cash value grows, the average cost and whether they require a medical exam.

Universal, variable life and index universal life insurance all have a flexible premium and death benefit amount, as well as require a medical exam.

Whole life insurance is the only type of permanent life insurance with a fixed premium and death benefit amount and offers options without a medical exam requirement.

Variable life insurance and indexed universal both have more risk by having cash value accounts linked to investments or an index market. These options are also likely to be the most expensive due to additional fees.