Determining Which Type of Life Insurance Is Best for You

üFor most, convertible (convertible to a cash-value policy) renewable (up to 30 years) term is the cheapest and best alternative (especially for students)

•Goal:  Income Replacement of breadwinner

•Relatively low cost

•Affordable coverage when life insurance is needed the most

•Can afford to carry the coverage needed for the time needed

•While it becomes very expensive with age, it may be less necessary as your other assets grow so you may need less insurance in the future

üCash-value insurance may be the best choice if you meet very specific criteria:

•Goal:  Medical Insurability.  You have a history of medical problems (and if you already have convertible term insurance) you can’t be denied life insurance if you convert

•Goal:  Estate Planning.  Your assets are very large, and you have estate planning issues (i.e., you need to shield some of your assets should you die)

•Goal:  Retirement Savings. You have already invested the maximums in your tax deferred accounts (IRA, 401k, Roth, SEP-IRA, etc.) and want additional tax-deferred savings

üStill unsure of yourself?

•Consider a renewable convertible term policy. 

•It allows the low cost of term insurance, with the ability to convert to a cash policy in the future within a specific number of years

•It gives you time to re-evaluate your current situation and still retain coverage for you and your family

Note of caution:

•Because of the complexity and high setup costs for cash-value life insurance, it is very expensive to change.  It is therefore of critical importance that you understand why you are buying and what you are buying before you purchase your policy.  These contracts are very expensive to change

•Consumers lose a significant amount of money each year because they buy policies they don’t understand and then cancel them a few years later. 

•Remember the key principles of insurance