Getting a life insurance policy is a great way to protect your family in case anything happens to you. However, with so many different options out there, it can feel overwhelming to choose just one. Knowing more about your options can help you make the right decision.
Changing Life Insurance Policy Types
Different policy types may suit you better at certain points in your life, depending on your circumstances. The good news is that if you find another type of coverage that may work better for you, you can sell your existing policy through a life settlement. By selling your policy for cash, you can free up funds for other needs, or it can help you acquire another form of coverage that may work better for you.
Universal Policies
This type of insurance comes with a cash value component, and your premiums will go toward this cash value component. Any changes made to how much you are paying and the amount of the death benefit are easy to instigate. As you learn about how they work, it is also important to note that if the cash value has enough money in it, you can pay the premium with that amount. Interest may grow, depending on the balance, so you can often use the interest to pay the premiums. Still, current interest rates will influence the interest you pay on your life insurance policy. If the interest rate goes below the minimum rate, you would need to add more to the premium to make up for this.
Variable Coverage
Contributing funds toward variable insurance allows the funds to go toward a few sub-accounts similar to mutual funds. There is the potential for quite a bit of growth, and the market will determine how likely you are to lose the funds. The cash value can be compared to stocks, making them great investment vehicles. They allow the potential for growth on a tax-deferred basis, but you can only invest in the accounts the policy makes available. A stock market crash would result in you losing the funds, making it a riskier product. However, you can change the death benefit and premium after investing in the cash value. Similar to other insurance types, there are a few risks.
Guaranteed Issue
This type of coverage works a little differently than traditional coverage, as you do not need a health exam to receive coverage. You also do not need to answer any questions about your health if you can pay the premium. However, if you have a mental condition that prevents you from answering the questions on the application, you are not eligible. Still, this can be a good option for those who have trouble getting traditional life insurance because of an illness or other issues. However, it has its drawbacks because it may not be as cheap as other types of coverage, and it may not offer as much coverage as you need. If you do have a terminal illness, you might consider getting final expense insurance as well. This can cover expenses for a funeral and burial so it would not burden your family members.