Life Insurance Blog and Resources

Life insurance purchases should be based on your needs. Before buying a life policy, you'll want to carefully evaluate your needs to make sure that life insurance is something you need. To ensure that you get the best advice as you make this decision, consult with a trusted financial advisor. "There are a lot of very smart sounding 'life only' agents or 'advisors' as they refer to themselves that have no fiduciary duty to make sure they put your interests ahead of their own. I would put a large amount of emphasis around finding yourself a fiduciary who is legally bound to do what's right for you without regard to how much commission they will receive if you buy a product through them.  The two places you can look to find honest, trustworthy advice are going to be what are referred to 'fee based' financial or retirement advisors, and if you work with an Estate Planning attorney they will likely be able to get you going in the right direction. Both have fiduciary responsibilities to act on your behalf, but nothing is ever guaranteed so you'll still want to do your own homework," recommends Ian Grove, associate advisor for Robert Green & Company. While you set up your meeting, this article can help you start thinking through several aspects that are part of the life insurance decision and purchase process. I reached out to life insurance experts to learn more about what aging adults need to know as they're buying life insurance. If you're buying life insurance for a parent, grandparent, aunt, uncle, or other senior loved one, the expert advice below will help you understand how to evaluate policies to find the best fit for your needs. Do you really need it? How much do you need? What can you afford? What kind of policy should you get? How should you buy it? Do you really need it? report_problem Attention: Most aging adults won't need life insurance. While aging adults don't usually need life insurance, there are circumstances that can make it a good purchase. The questions in this section will help you determine whether or not you need it. Before you work with a life insurance agent or contact an insurer, you should consider whether or not you actually need life insurance or if you just think you need it.  "As you get older and into your senior years, it can become less critical to have life insurance. For many people, they have paid off many debts at this stage and no longer have fully dependent children.  However, that’s not the case for everyone, and there are still important reasons to at least consider if it’s necessary for your family. If your spouse or a child is still heavily dependent on you for financial support, that may be reason enough to have a policy. There may be a time where it simply no longer makes sense to have life insurance; however, it’s best to carefully consider this every step of the way and make the decision that best fits your life at each stage," says Brett Wilson, Ethos vice president. If you are considering life insurance, here are questions to think through before you buy it: Do you still have dependents? Would your spouse become responsible for paying your debts? Will you need to be in an assisted living or have long term care? How will your funeral be paid for? Are you trying to leave an inheritance? Do you have enough saved for retirement? Do you still have dependents? If you have dependents or a spouse, a life insurance policy may be right for you because it can provide money to pay tuition, living costs, etc. that you would pay for if you were living. Think about your current financial situation, retirement savings, and other assets before purchasing a policy. Charles Read, CPA, and former life insurance agent shares his experience: "I am now a widower and carry no life insurance. While my wife was alive, I carried no life insurance the last ten to fifteen years or so of her life. Why? No need. I have a retirement program that would have kept her in the lifestyle she was accustomed to for her entire life." If you don't have dependents, you may not need to buy life insurance. "When is life insurance desirable? When you have small children that need to be raised.  So unless you are a senior raising a grandchild that will need to be brought up and educated if you are not there, why buy a poor investment?" adds Read. search Highlight: If you have dependents, you may want to consider life insurance. Consider your current financial situation and savings. If there wouldn't be enough to care for your dependents if you passed away, you may want to purchase a life policy. Back to "Do you really need it?" Would your spouse or someone else become responsible for paying your debts?  In most cases, your outstanding debt will just be paid by whatever amount of cash or assets you leave behind, which will reduce or eliminate any inheritance. But, the bottom line: most of your debt, if it's solely in your name, won't be passed on to your dependents. "What if you have outstanding debt? So what. They can’t get money out of a dead person and your kids are not responsible," says Read. Before you get life insurance to cover outstanding debt, take stock of your debt and understand what would happen to your debt if you passed away. Your debt may not go to your kids, but your spouse or partner may become fully responsible if they're still living. Depending on what the rest of your financial situation looks like, you may want to purchase a life policy to alleviate those burdens. search Highlight: If someone else would take responsibility for your debt, you may want to get life insurance. Again, review your current financial situation and savings. If your debt would be passed to someone else or you wouldn't be able to leave enough for your dependents to live on, a life policy can be a wise purchase. Back to "Do you really need it?" Will you need to be in assisted living or have long term care?  While you can't predict the future, you need to think about what health challenges you may face down the road. What are your options if you can no longer live on your own? Do you have children, nieces, or nephews that can help you? Will you need to live in an assisted living facility or pay an aide to help you at home? If you think you'll need assisted living or long term care, understand what your payment options are. You may be in a position to pay for that with savings. If you qualify for Medicaid, that coverage may help pay the costs. You can also look into long term care insurance, but these policies can be expensive and difficult to qualify for. Grove explains why: "The traditional LTC insurance underwriter will look to qualify you on what they call Mortality tables which basically means they are trying to make their very best estimate on how you are going to die or how sick or incapacitated they think you will get when you begin the process of 'moving on.' The later, Mortality table wants to know not how you die but instead when they think you will die. This makes it far easier to get past the underwriters with things like a bad hip or sleep apnea.  Next, the cost. Traditional LTC insurance was one of the most expensive coverages you would ever purchase, primarily due to the likely need for a claim. If you make it to your sixties, it's more than a flip of a coin that you will need some type of long term care and the costs can be staggering. Where I live in Napa, California you can expect to pay upwards of 12,000 a month for a decent private room in a care facility." If long term care insurance is out of your budget and you don't have savings to pay for long term care, you may want to consider a life insurance policy with a long term care rider or even an accelerated death benefit rider. "Seniors need to know that more and more life insurance companies are offering life insurance with chronic illness or long term care benefits. A life insurance policy can serve a dual purpose to help provide their beneficiary with a cash payout if they die and/or to help pay for possible long term care or home health care someday. The living benefits mentioned above are available on both term and permanent life insurance," says Gordon Conwell, III, owner of Americanterm.com. search Highlight: Life insurance as a way to pay for long term care isn't a standalone reason to buy a policy. You don't know whether or not you'll need long term care and you may have other options like moving in with a younger family member. If you qualify for Medicaid, it may cover your long term care costs. If you're buying life insurance for another reason, consider a policy that offers an accelerated death benefit or long term care rider. Back to "Do you really need it?" How will your funeral be paid for? While you won't be around to foot the bill for your funeral, you may want to think through how those costs would affect your loved ones and what you can do now to alleviate costs for them.  "I carry no life insurance now because why would I need it. My funeral expenses will be paid for. Cremation is less than $2,000, and the VA provides my burial plot and marker. The other reason is funeral expenses so as not to be a burden to your children. Save $5,000 and preplan. Buy the cheap casket that the funeral director would talk your children out of. Flowers, will you care? Give me a break! Here in Texas they can actually bury you in a cardboard box or nothing at all, cheap!" advises Read. While your situation and final wishes may be different from Read's, you should explore your options for covering funeral expenses so that your family doesn't have to worry about it. Before you prepay for your funeral, vet the funeral home carefully. You don't want the funeral home to fold before you pass away since prepaid funerals can't be passed to a different funeral home.  Alternatively, a burial insurance or final expense insurance policy will make a cash payout that can be used as the beneficiaries see fit. Just remember that you'll need to make premium payments to keep your policy effective. search Highlight: Life insurance doesn't have to be part of your plan for paying funeral costs. Figure out how much your funeral will cost. Do you have a burial plot already? What do funeral prepay options look like? Would your lingering savings be able to cover expenses? Determine what matters to you, and make a plan to cover those costs. Back to "Do you really need it?" Are you trying to leave an inheritance? Some aging adults may approach buying life insurance as a way to leave an inheritance without paying income taxes. If this is something you're considering, meet with a financial adviser to discuss the best way to move forward. Depending on your situation, you may be better off investing on your own. "Life insurance is a terrible investment as well. Take the same money and put it into a diversified portfolio, you will do much better. Life insurance funds large salaries and big dividends to investors, you get a fraction of what you pay for. They have buildings full of actuaries to make sure. Do you want to leave an inheritance? Save the amount of the premium and invest it, in all probability you will leave more money than the life insurance will pay. The insurance company actuaries know this but won’t tell you. If they do, salaries at the insurance company will have to be cut, including that of the actuary and management," says Read. search Highlight: Meet with a financial adviser before buying life insurance to leave an inheritance. While one of the biggest advantages of life insurance payouts is that they are not subject to income tax, you'll want to talk to a finanical adviser about whether or not this is a good option for your financial situation. Life insurance payouts are subject to estate taxes, so they're not entirely tax-free. Back to "Do you really need it?" Do you have enough saved for retirement? Consider what your retirement accounts look like, how much you'll get from Social Security, and how much longer you plan to work. Do you have enough to cover your expenses? If you have a permanent life insurance policy that accrues cash value, you can use your policy to supplement your retirement income. Keep in mind that your beneficiaries may not end up with a death benefit payout if you use your policy's cash value. "One of the benefits to leveraging these permanent insurances is there is a savings component built into the policy. If designed properly, you can gain the protection the life insurance provides and at the same time have a savings account inside that policy you can access while you're still alive to help supplement your lifestyle in retirement. As attractive as that function is, it is not the main reason most seniors look to fund a life insurance policy," says Grove. Alternatively, you can invest or save what you would spend on monthly premiums to have additional retirement income. search Highlight: Life insurance can supplement your retirement income, but you can invest on your own instead. Supplementing retirement income isn't a good reason to buy a life insurance policy. Remember, whatever cash you receive while living is usually taken out of the death benefit. However, the ability to get income can be an additional benefit to consider if you have other reasons for needing life insurance. Back to "Do you really need it?" Back to Menu How much do you need? If you do need life insurance, you'll want to consider what you can afford and carefully calculate the amount you need. Reviewing the questions in the previous section will help you understand whether or not you need life insurance and why you're buying life insurance if you do need it. Understanding why you're buying a life policy will help you determine how much to buy. "Seniors, like all life insurance shoppers, need to evaluate what a policy will help protect. A thorough needs analysis should be performed to make sure they are not under or overinsured," says Michael Quinn, Life Insurance Blog owner and director of marketing. If you're young and overinsured, there isn't usually much of a difference in premium amounts. It will make a big difference if you're an aging adult. "For a 30-year-old man, the difference between $500,000 and $1,000,000 of 10-year term is less than $10 per month. For a 70-year-old man, the difference per month for the same policy could be $300 or more. By taking the time to correctly assess your coverage needs, you could save yourself thousands of dollars a year in premiums," notes Dennis Ho, cofounder and chief executive of Saturday Insurance. report_problem Attention: Save money by only buying the amount you need. If you don't have a trusted financial advisor, talk to a few life insurance agents to see how much they recommend buying. Getting recommendations from different agents will help prevent you from overbuying and help you find a policy that meets your needs. Back to Menu What can you afford? You also need to buy a life insurance policy that you can afford long-term. If you stop making premium payments, you'll lose your coverage. "Seniors should only buy life insurance they can afford from someone they trust," advises Ross Quade, Insurance Agent and Owner of Prime Mutual.  Buying a policy from a trustworthy agent is also important because life insurance is a big financial commitment, and you don't want to be upsold or buy more than you need. As you work with your agent, be clear about budgetary restrictions and any health conditions that may affect your premium rates. Being clear will help them find a policy that fits your needs and budget. "It's also very important to be honest and forthcoming to their agent about their health and other qualifying information. Their agent will be researching which companies they can qualify with based on this information," says Quinn. Keep in mind that what you can afford may change depending on your age and health circumstances. "Seniors should understand that health and age are the biggest factors that play into life insurance. The healthier and younger one is, the cheaper the life insurance policy will be.  Seniors should understand that acquiring health insurance before after being diagnosed with a condition will lower their chance of obtaining an affordable life insurance policy or obtaining one at all as most insurance policies require medical exams," says Jasmine Young, MBA, CPA, CFE, and Southern Tax Prep founder and CEO. Back to Menu What kind of policy should you get? There are many kinds of life insurance policies available, each with different features that make it advantageous for certain situations. While some insurers have ages at which they'll stop issuing policies. "The most important thing that seniors should understand about insurance is that options are available. Insurers are much more comfortable offering new coverage older ages today and insurance can be issued to folks as old as 80," says Ho. Term life insurance Key Takeaway: Term life insurance isn't always a good fit. If you're buying life insurance to cover debt, a term policy is a good option because your debt will decrease as you make payments over time. Otherwise, be careful with term life insurance. It may expire before a claim is made. If you renew the policy, you'll likely renew at a higher premium rate. Term life insurance only offers coverage for a set period of time. Term policies typically have lower premiums than permanent ones, which can make these policies attractive.  "Term life insurance is the best option for seniors. Term life insurance guarantees payment of a stated death benefit during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the policy to terminate. As seniors get older, they may have paid off all their debts or their children may become fully independent. In this case, they may not need or want life insurance anymore, and therefore would not want to be stuck with a whole life policy," suggests Wilson. A term policy may work for you if you're primarily buying coverage for debts. If you think you'll need coverage longer, term coverage may not be a good idea. "While it may be tempting to purchase a 10-year term policy to minimize costs, if there is a chance you need insurance longer, you might be better off getting a 20-year term or permanent insurance to be safe because extending your coverage in the future or purchasing another policy may be prohibitively expensive or even impossible if your health changes," cautions Ho. Quade agrees: "For many seniors, it's imperative that the coverage does not expire before they die, which is why term policies are often not the right fit." Whole life insurance Key Takeaway: Whole life insurance may be a good fit for some. If you're in good health, you can take advantage of a fully underwritten policy for lower premium rates on a permanent policy. Assess your insurance needs carefully and consult with a financial advisor to determine if a whole life policy is best for you. Whole life insurance is permanent life insurance coverage. As long as you make your premium payments, you'll maintain coverage with no premium increases. A whole life policy also accrues cash value that you can use while still living. The downside is that these policies are the most expensive type of life insurance. "Whole life insurance is the best life insurance option for seniors. Whole life insurance does not terminate at a specific age like term insurance is designed to do. Term life insurance for seniors often increases in price every five years and cancels after age 80. With whole life insurance, your coverage will last up to 121 years old. Whole life insurance is guaranteed to be there when you need it the most, as long as you keep paying the premiums on time," says Randy VanderVaate, Funeral Funds owner and president. If you're in good health, you may be able to find lower premium rates by buying a fully underwritten whole life policy than a guaranteed issue final expense policy. Before you buy a whole life insurance policy, remember why you're buying life insurance. Is it a permanent need like funeral costs and leaving an inheritance? Final expense insurance Key Takeaway: Final expense insurance is great if you're worried about passing underwriting. If you're buying life insurance to cover funeral costs, a final expense policy works nicely. You can find guaranteed issue policies that do not require underwriting. Remember, this means that you'll pay higher premiums. You'll only be able to buy a low amount of coverage. Final expense insurance is meant to cover funeral costs. "A more popular option for seniors is final expense insurance because they allow for elderly people to obtain an affordable policy without a medical exam. The benefit is smaller, often under $25,000, and can be approved within the same day," says Quade. If you're just looking for a policy to cover funeral expenses or have health issues that would affect underwriting, a final expense policy may be a good fit. These policies offer permanent coverage and level premiums. These policies are sometimes also referred to as burial insurance. "Most of the best burial insurance companies have lenient underwriting for the typical health problems that come with age, such as high blood pressure, high cholesterol, or diabetes are generally accepted for first-day coverage. These whole life insurance plans for seniors are designed to be easy to qualify for and be affordable for seniors on a fixed or limited income," says VanderVaate. As you consider final expense policies, you'll want to keep in mind that only lower amounts of coverage are available with these policies: "Final expense benefit amounts usually max out around $50,000 which will pay for their funeral and other final expenses. Most seniors aren't looking for big policies like when they were in their thirties and needed typical coverage for their mortgage and income replacement," says Quinn. You should also understand that your final expense policy may have a graded death benefit. "Some final expense policies don't pay the full death benefit right away. They can have what's called a graded benefit that might not pay the full amount for a year or two. These types of policies are offered to those with health issues — those who might not qualify for a non-graded plan. If the owner passes away early, then their beneficiaries will only receive the premiums paid into the policy, 10 percent on top for example, says Adam Hyers of Hyers and Associates. But, these policies may not be the best fit for you: "The biggest thing seniors need to know about life insurance is that they shouldn’t settle for the common final expense plans advertised everywhere. These plans are more expensive and have low coverage amounts since they are more accepting of high-risk clients.  As a senior, you should go with traditional permanent coverage because you’ll save a ton of money. In addition to that, you won’t have any waiting periods and be able to get much more coverage. So keep the final expense plans as the last resort," advises Mack Dudayev, founder InsureChance Inc. Universal life insurance Key Takeaway: Universal life insurance may be a good fit for some. Universal life policies are typically cheaper than whole life policies. For approval with these policies, you'll go through underwriting. If you're not in good health, you may want to pursue another option. There are several kinds of universal life insurance. Work with your financial adviser to figure out which type is ideal for you. There are several types of universal life insurance. A few experts recommended a guaranteed universal or fixed indexed universal life insurance policy: Guaranteed universal life insurance "For the healthiest seniors, looking for coverage that is $30,000 or above, I would recommend looking into a Guaranteed Universal Life. It is a type of policy that ensures that they would not outlive their policy and when the time comes, they have a policy in place. These policies are considerably less expensive when compared to traditional final expense policies. However, they have more extensive underwriting. Oftentimes they require a medical exam. Again, this is a great option for people with average or above-average health," recommends Zhaneta Gechev, founder of One Stop Life Insurance. Fixed indexed universal life insurance "The best policy to purchase would be a FIUL or fixed indexed universal life policy. The cash value will grow tied to positive stock market index performance, but not fall when the index drops in value," recommends Mark Charnet, founder and CEO of American Prosperity Group. Policy riders Key Takeaway: Policy riders add value, but don't forget why you're buying life insurance. You may want to consider a policy with living benefits like cash value and an accelerated death benefit rider that can help you with challenges as you age. However, remember that the riders aren't the reason you're buying coverage. Focus on finding the best policy for your purpose and budget. Whatever type of policy you decide is best for you, pay attention to policy add-ons called riders. You'll also want to consider other features built into the policies you're considering. "Today, many policies have optional riders that can help you further customize your life insurance to your situation. For example, many insurers offer accelerated death benefit or long-term care riders that allow you to access a portion of your death benefit if you get a terminal illness or need long-term care. For seniors, riders such as these can greatly improve the value of their policy and are worth considering," suggests Ho. Don't get caught up in policy features and riders, though. Remember the core reason you're buying life insurance. Grove cautions: "I think the one biggest factor in all of this is to make absolute sure you've done your due diligence in understanding why you are going to look into the different types of life insurance policies and not get super distracted by one specific feature without weighing what you're sacrificing for that feature." Learn more about life insurance policy riders by reading "7 Common Life Insurance Policy Riders". Back to Menu How should you buy it? You've got several options when it comes to how you buy life insurance. You can work directly with the insurer, work with an independent broker, or buy online. Life insurers file their rates, so choosing one option over another won't find you a better rate from the same insurer. We'll go over each option briefly here. For an in-depth explanation of the pros and cons of each option, read "What's the Best Way to Buy Life Insurance?: What You Need to Know About Buying from an Insurer, Agency, and Online Retailer". If you buy directly from the insurer, you'll limit yourself to the policies and rider offered by that insurer. If you've looked around at a few insurers and have settled on one, then buying directly from an insurer isn't a bad option. However, if you have health issues, you may want to work with an independent life insurance agent or agency. They are familiar with how insurers underwrite certain conditions, which means they can help you find an insurer and policy that fit your needs. "Using an independent broker who offers multiple companies gives them the best chance at getting affordable coverage. This will avoid wasting time applying for companies or policies that may deny or rate them up at a much higher rate," says Quinn. Be careful when you're looking at policies online. Some websites generate leads for companies. If you give these sites your contact information, you'll end up with a bunch of sales calls. If a site won't show you a quote unless you share your contact information, find another site to use. Whatever purchase method you choose, be prepared to spot red flags in insurance companies and agencies. Choosing trustworthy and reliable companies will also help you make a good purchase. Truly understanding whether or not you need life insurance, your options, and what considerations to make will help you make a wise choice for yourself and loved ones.

Updated April 1, 2020. Many people create GoFundMe accounts to help cover unanticipated expenses, like high medical bills or funeral expenses. "Most people have no concept of the cost of funerals, which is why you see GoFundMe's to pay for funeral expenses," says Elizabeth Kent, a former cemetery director.To be prepared for leaving life, it's important to know funeral costs and associated expenses, as well as payment options. Understanding the costs associated with death will help you and your family be financial prepared. The cost of a funeral The National Funeral Directors Association (NFDA) reports the median burial and cremation costs in 2019: The median cost of a burial with a viewing was $7,640. With a vault, the cost was $9,135. The median cremation cost was $5,150. With a cremation casket and urn, the cost rose to $6,645.“If you ever walk into a funeral home and you ask for a General Price list, the funeral home is required by the Federal Trade Commission (FTC) to give you a General Price List, a Vault Price List, and a Casket Price List.  All of those things may be in one price list, but look for all three to make sure they are upfront. If the funeral home fails to comply, I would leave immediately and not work with them,” says Kent.Tyler Yamasaki, CEO of funeral home comparison website Parting.com, and former cemetery director Elizabeth Kent identified the following services and fees that are associated with funerals: Funeral home basic services fee Death certificate “Bring the body into care” fee Embalming Viewing Funeral Building rental Graveside service Casket Hearse and transportation fees Plot purchase Opening and closing grave fees Vault or concrete liner fee Grave marker or headstone Cremation Funeral homes are obligated to be upfront and transparent about the cost of their services.Yamasaki shared some insight into 2019's market: Funeral home basic services: $1000-$3000 Casket: $1500+ Vault or concrete liner (required by most cemeteries): $1000+ Headstone or marker: $1000+ The expenses associated with funerals are pretty steep. However, Kent says, “The industry trend is that the cost of a funeral doubles every 10 years. That trend has been accurate for as long as the funeral industry has been around.” Paying for a funeral Cremation is cheaper than a traditional funeral with embalming services, large burial plots, and caskets.“By going the cremation route, a family can potentially save on all cemetery costs, embalming, and even the basic services. What has become increasingly popular is the Direct Cremation. A direct cremation is a stand alone service that just transports the deceased from the place of death, files the paperwork, cremates the body, and returns the cremated remains to the family. This can be done, in some areas, for as little as $600. The family then can decide on their own disposition options,” says Yamasaki.All funeral costs are due at the time of service. Life insurance, final expense insurance, or burial insurance can help cover these large fees with the death benefit payment. Even if you have enough savings to pay for your funeral, your family members and friends may not be able to access the funds in your bank account immediately. The death benefit payout from a life insurance policy can greatly help your family as they pay for your funeral and their living expenses.Another option is to pay for your funeral before you die. When people pre-pay for funerals, payment plans are available.“A prepayment plan is called a Pre-Need and is usually done through an insurance company that the funeral home is associated with.  It is actually a really, really, really, smart idea to do a Pre-Need, because it locks the costs into place. If you die 30 years after you make it, the costs are guaranteed and the funeral home has to agree to the agreement. The only time a funeral home does not have to abide by the agreement is if you got the agreement from a different funeral home than the one providing the funeral services,” says Kent. Life Insurance and Protecting Your Family Consider a life insurance policy as a way to protect your family financially. View top life insurance companies and the policies they offer. Read what clients have to say in reviews. Learn More Other expenses Matt Schmidt, CEO of Burial Insurance Pro, says, "When planning a funeral, many people tend to forget about the additional final expenses that come at the end of one’s life. Such expenses include medical bills, installment debt, cell phone bills, cable bills, and other monthly expenses.  If wanting to address all of the final expenses a person will face, you definitely want to account for those. Unfortunately there are more expenses then the basic funeral and burial costs."Take some time to think about what would happen to your family’s finances and make a plan. How much debt do you have? Whose name is it under? How dependent is your family on your income? Would your family have to pay for full-time childcare? Purchasing a life insurance policy, buying final expense or burial insurance, pre-paying for the funeral, and knowing your options are all things that can help you and your family be financially prepared for an emergency and avoid funeral-expense related debt.

Life insurance protects your loved ones’ financial stability by paying out a lump sum benefit if you pass away. This cash can be used to pay for funeral expenses, finish paying a mortgage, and cover remaining debt obligations. Life insurance benefits are not considered income. They are only taxed as part of estate taxes, not income taxes, which is another reason that life insurance is a great investment in your family’s financial future. There are lots of options when it comes to life insurance. Many employers offer life insurance as part of their benefits packages for employees. Keep in mind that while these group rates tend to be incredibly cheap, the coverage will stop when your employment ends — whether that’s taking a job elsewhere, retiring, or losing your job. "Employer offered life insurance is great if you have it, but must realize there is no flexibility. If your employment situation changes, you'll have either a temporary or permanent lapse in coverage and getting coverage later in life is usually much more expensive than if you opted to get private term life insurance when you were younger and generally healthier," says Mark Cluett, Director of Content and Digital Assets. Key Takeaway: If you purchase your own life insurance independent of your employer, you’ve got several options. Term Life Insurance Whole Life Insurance Universal Life Insurance (variable or indexed) Final Expense Insurance (Funeral Insurance) “The options for life insurance are vast — from whole life insurance to universal life insurance to many variations and permutations of the above, some with market participation and investment exposure and others with a dizzying array of riders and features that will make your head spin. Be very wary about purchasing something that you don't fully understand,” advises Joel Ohman, MBA, MDiv, CFP ®, and Insurance Providers CEO.  Understanding your options is the one of the first steps in finding and buying a life insurance policy. This article focuses on the basics of each kind of life insurance available. For more information on common riders, see “7 Common Life Insurance Policy Riders.” Jump ahead to: What kind of life insurance should I buy? What is Term Life insurance?  Key Takeaway: Term life insurance is advantageous if you have a temporary coverage need. These policies typically have the lowest premium rates. Coverage only lasts a set number of years. Simplified underwriting may be available depending on your health and the insurer. If you have dependents to care for, debt that would be passed to a family member, or are taking on a small business loan, a term policy is a good fit. When you sign up for term life insurance, you agree to give your insurer monthly payments for a limited period of time for a fixed coverage amount.  Term Life insurance is usually the cheapest form of life insurance because it only lasts a certain length of time. With most term life policies, the monthly premium is set for the length of the term. This is convenient because medical conditions can develop. Some medical conditions, like diabetes, increase monthly premiums. It’s convenient to lock in costs early. However, if you renew your policy, you’ll likely have higher rates. Most insurers that offer term life policies have several term length options. These options tend to start at 5 years and can be up to 30 years. These options allow clients to choose the length that best fits their needs. Some life insurers also offer a term conversion rider with their term life insurance policies. This rider allows policyholders to convert the term life insurance policy into a permanent one during a set period of time. This rider is great because it allows policyholders to purchase a very affordable term life insurance policy with the ability to convert it to a permanent policy later. Another common rider available for term life insurance policies is guaranteed renewability. This feature allows policyholders to renew their policy within a certain time frame. While the premium rates may be different when the policy is renewed, the life insurer will renew the same coverage. Some life insurance carriers offer a return of premium with their term life insurance policies. This means that if the company does not pay out a death benefit, the total of the premiums is returned when the policy expires.  What do experts say about term life insurance?  Jeff Root from Rootfin Insurance Blog “A simple rule of thumb is if you're in your prime income earning years (30–65), buy enough term life insurance to replace your income until your estimated retirement date. Don't worry about permanent life insurance until you reach a high income level.”  Richard Best, personal finance expert at Don’tPayFull “The most practical use of term insurance is for situations where you can be certain that the need for life insurance will not exist after a specific period of time. For example, if you need life insurance coverage to ensure the needs of your children are met through the time they graduate from college and are out on their own, your term coverage might only need to last until they complete college. The problem with term coverage is that, if you determine that your need for coverage will last beyond your intended time frame, you would need to renew the term coverage or purchase a new policy at substantially higher premium costs. And, if you develop any health conditions, you could be denied coverage.” Joel Ohman, MBA, MDiv, CFP ®, InsuranceProviders CEO “It's very rare that you need any type of fancy life insurance policy other than a plain vanilla term life policy. Term life is simple, straightforward, and likely much cheaper than you think.”  Buyer's Guide: Term Life Insurance Download our free guide to learn more about term life insurance, how to decide if you need it, tips for choosing a life insurance company, and customer reviews. Download Guide Back to List What is Whole Life insurance?  Key Takeaway: Whole life insurance offers stability for those with a permanent coverage need. These policies come with high, but level premiums. Your policy builds cash value at a guaranteed rate. You can use the cash value while living, but it will lower the death benefit payout. A fully underwritten policy can get you the best premium rate. Whole life insurance is a form of permanent life insurance, which makes it more of an investment than term life insurance. Whole life insurance policies have a death benefit and the ability to accrue cash value through investments. The fixed monthly payments that you contribute to go into a tax-deferred account that accumulates interest over time.  Whole life insurance policies accrue cash value at specified minimum rates and are not subject to the high level of fluctuation in the market. However, if the life insurance company does well, the cash value can grow more. This stability is a nice feature of a whole life insurance policy. The cash value of the policy contributes to the death benefit as it grows. Whole life cash value acts like a savings account. As the cash value accrues, policyholders can use it as an asset when applying for loans or even borrow from their cash value. If the insured passes away before paying back the borrowed cash value, the death benefit will be reduced by the outstanding balance.  Because a whole life insurance policy does not expire and requires more overhead management for the cash value accrual, monthly premiums are much higher than term life insurance premiums. Part of the monthly premium goes toward the death benefit, part of it goes to overhead, and another part goes to the policy’s cash value.  When you sign up for whole life insurance, your payments are guaranteed to stay the same throughout maturity. Whole life insurance also guarantees that your beneficiaries will get the face value of the policy at a minimum. Purchasing a permanent life insurance policy early is wise because it allows you to lock in lower rates. What do experts say about whole life insurance?  Richard Best, personal finance expert at Don’tPayFull “The oldest and most basic form of permanent life insurance, whole life insurance is a fixed, guaranteed product, meaning the face amount, premium and cash value growth are determined at issue and guaranteed for the life of the contract. Some insurers pay dividends which can be applied towards the premium payment or used to buy paid-up additions which can increase cash value growth and the face amount.” Travis Price, IFixMedicare.com Licensed Insurance Agent “On the downside, Whole Life insurance tends to be the most expensive insurance type out there. If you're buying a policy in whole life, I tend to tell people that it should be enough to get you into the ground. That's a relatively low amount, from $10,000–$15,000, and keeps your premiums lower. Some people simply can't qualify for insurance because of their health issues. In this case, whole life offers a guaranteed issue policy. The upside is that you get coverage, but the first two years you don't get the full face amount. Instead, the insurance company simply refunds the premiums that were paid plus 10 percent.” Kurt Hemry, Ironwood Wealth Consultants President “Whole life insurance may earn guaranteed cash value increase as well as an annual dividend. These are often considered the most conservative of policies regarding cash value growth. An upside to this type of policy is the protection of your cash in that you never lose money because of Wall Street losses.” Back to List What is Universal Life insurance? Key Takeaway: Universal life insurance offers flexibility to people with permanent coverage needs. These policies are typically cheaper than whole life insurance. Monthly premium rates can change over time. Policyholders choose how to invest the cash value and assume more investment risks. The cash value can be used as an asset while still living but using it affects the death benefit payout. Universal life insurance has many of the same features as a whole life insurance policy. It is permanent and has cash value. The monthly premiums go three places: death benefit payment, overhead management, and cash value building. The cash value grows interest from investments tax-deferred and can be borrowed while the policyholder is still living. The premium rates for universal life insurance policies are more expensive than term policies and also tend to be less expensive than whole life policies. Unlike whole life insurance, universal life insurance gives policyholders the flexibility to adjust premiums and coverage levels according to their needs and investment goals. What is Variable Universal Life Insurance?  Variable universal life insurance allows policyholders to invest the cash value of their life insurance in separate accounts, sort of like mutual funds, with different stock and bond options. What makes this type of insurance still universal is that the policy owner can make flexible monthly payments. If you are interested in variable universal life insurance, make sure to pay attention to the management fees and any penalties that come with changing your coverage amount. What do experts say about variable universal life insurance?  Richard Best, personal finance expert at Don’tPayFull “Variable life insurance allows the policy owner to allocate funds among different investment options, such as various types of stock and bond accounts. Although the separate investment accounts are subject to market fluctuations, the death benefit is guaranteed. Some variable life policies offer minimum return guarantees as options.” Daniel Ray, National Independent Life Insurance Agent and Owner of PinnacleQuote Life Insurance Specialists “PROS: A permanent policy with an investment component that can accelerate cash value. CONS: You are at risk of market fluctuations which can affect your premiums and face amount.” Kurt Hemry, Ironwood Wealth Consultants President “With variable life insurance, you select from a number of mutual funds that you want your money to be invested. This provides you with the opportunity to earn as Wall Street goes up. However, when Wall Street goes down, so does your policy value.” What is Indexed Universal Life Insurance?  Indexed Universal life insurance has lower investment risks. The investments can only grow. If there is a year when the investments lose money, the cash value stays the same.  Loans from an indexed universal life insurance policy are tax-free. These policies can also be used as retirement income and withdrawals are also tax-free. What do experts say about indexed universal life insurance?  Daniel Ray, National Independent Life Insurance Agent and Owner of PinnacleQuote Life Insurance Specialists “PROS: A permanent policy that is tied into an index like the S&P.  CONS: If the policy is underperforming in your later years, rates can double or more which can result in seniors losing insurance that they can't afford when they need it the most.” Gordon E. Conwell, III of Americanterm.com “Variable Universal Life and Indexed Universal Life are both investment type of life insurance policies, primarily for people that are looking for both life insurance and/or an investment. Many people over-fund these policies to potentially gain a larger investment from the tax deferred benefits of these policies, so it's not easy to show rates for this type of coverage as most people will purchase the smallest amount of insurance for the amount of the premium they want to pay for this coverage to maximize their investment potential.” Back to List What is Final Expense insurance?  Key Takeaway: Final expense insurance is designed to cover funeral and burial costs. Final expense insurance is permanent life insurance. You'll buy a smaller amount of coverage because insurers set limits. Some policies are guaranteed issue, which means they require minimal underwriting. Final expense insurance is ideal for covering seniors. Final expense insurance is a kind of permanent life insurance. It is also called funeral insurance, cremation insurance, or burial insurance.  Final expense insurance is especially good for seniors and offers more limited coverage levels designed to cover funeral and final expenses. Because of the lower levels of coverage available, final expense insurance premiums tend to be fairly low. It’s a great option for those who do not have another permanent life insurance policy and are not interested in term life insurance. What do experts say about final expense insurance?  Travis Price, IFixMedicare.com Licensed Insurance Agent “For seniors, I suggest they only purchase the fixed amount that they would need to handle their final expenses if they don't have resources to handle it (like savings or 401k).” Jeff Root from Rootfin Insurance Blog “If you're nearing retirement and getting close to living on a fixed income, you no longer need that much term coverage and you should decide if permanent life insurance (whole life, indexed universal, guaranteed universal life, final expense) is needed. Will you need life insurance to cover any final expenses? Will you need life insurance for estate planning purposes? Then go from there.” Daniel Ray, National Independent Life Insurance Agent and Owner of PinnacleQuote Life Insurance Specialists “PROS: Small and affordable whole life policy to cover final expenses.  CONS: Usually policies are between $2,000–$40,000, and are geared for seniors. But are limited to the coverage amount.” Back to List What kind of life insurance should I buy?  Key Takeaway: Consider these questions to help you buy a policy that meets your needs. Why are you buying life insurance? How much money would your family need to replace the work you do? What can you afford to spend on monthly premiums? In what ways will your life insurance needs change over time? “More important than what kind of life insurance you should get, is how much insurance you should have. I’ve never heard a widow ask me what type of life insurance her husband had; her concern is always how much did he have,” says Hemry. Fortunately, many life insurance needs calculators are available online, which makes determining your coverage needs easy. “If you find yourself getting bogged down with all of the various calculators and different formulas used then take a step back and just ask yourself this question, "What is the absolute minimum amount of money that my loved ones would need if I passed away to not have to worry about money, not have to change their lifestyle or dreams, and not have to get a new job?" Now double it,” says Ohman. Once you’ve gotten a number, think about the pros and cons of each policy type and what your specific needs are. “For every type of insurance product available, it is the right thing for some people and wrong for others. I suggest you think about it this way: Use term insurance for short term needs and more permanent insurance for long term needs. For example, term insurance fits well to cover debt that you do not want to leave to your family such as a mortgage. Purchase term insurance that ends when the mortgage ends. Use more permanent insurance for expenses that will not go away, such as funeral expenses, other final expenses and income needed for the people you leave behind,” says Nancy D. Butler, CFP ® , CDFA ™, CLTC, and owner of Above All Else, Success in Life and Business ®. Remember that while term life insurance policies have an expiration date, some can last as long as 30 years. If the policy includes a guaranteed renewability or term conversion rider, you can extend the coverage longer. “Term life insurance is the best choice for most people, especially those in their younger years looking for a pure protection product. Permanent life insurance and other products with an investment vehicle attached rarely payout the same dividends someone could achieve by opting for term insurance and making some modest investments with the money they save,” says Cluett. Permanent life insurance policies can be advantageous because they accrue cash value that it not subject to income taxes and can be accessed while the insured is still living.  “Permanent policies are used when the need for protection or capital will extend into well into the future.It’s often used in wealth transfer strategies, business planning situations, and where the need for income replacement extends beyond the dependency years of the children,” advises Best. However, permanent life insurance policies are more complex and some are affected by the stock market, which can make them harder to understand. “Within each of these sub-categories of permanent life insurance are a multitude of variations of each. The universe of different types of life insurance products is vast, and should be explored with your specific circumstances in mind along with the guidance of a qualified, and preferably, independent life insurance professional,” adds Best. What questions should I ask?  Daniel Ray, National Independent Life Insurance Agent and Owner of PinnacleQuote Life Insurance Specialists “The questions you should ask when purchasing life insurance are What do I need to protect and for how long (Term Life)? Is it safer to overfund a permanent life policy rather than be limited with contributions to an IRA/401k? (Whole Life/Variable/IUL) Will my savings cover my funeral? Will my family have a financial burden when I pass? (Burial Policy/Final Expense)”  Nancy D. Butler, CFP ® , CDFA ™, CLTC, and owner of Above All Else, Success in Life and Business ® “How much do I need? What type(s) are appropriate? With Universal and Variable Life you need to know what interest rate the agent used when running the illustration to determine what the premium will be. If they use a rate that is too high, you run the risk of losing the policy in later years unless you substantially increase the premiums. I recommend a reasonable rate of return to use in an illustration today is 6 percent or less. High returns going forward are of course, not guaranteed regardless of past performance.”  Taking these questions and expert tips into consideration will help you make a smart life insurance decision for yourself and your family and friends. Your decision will offer peace of mind and financial security for your beneficiaries. Looking for more tips? Check out some good advice and bad advice that people have received. Ready to start looking at companies? Check out Best Company’s top-ranked life insurers.