Thursday, November 3, 2016

Life Insurance Options in Today’s Marketplace

We frequently are asked about life insurance and the different types available from not only State Farm, but from the marketplace in general.  The standard term and whole life policies do still exist, however, as with any product and consumer need, life insurance has evolved and expanded. 

Today, you can find a whole host of different types of life insurance to fit a wide range of customer needs.  Need something short term to cover a loan?  Concerned about how your mortgage will be paid if something happens to you or your spouse?  Want a return on your premium after paying into a policy for a period of time?  Or, do you want something that will help offset the rising cost of your kids’ college education?  These are just a few of the questions we get when discussing life insurance with our clients.
In previous times, term and whole life were really the only options with few variations and limited flexibility.  That’s not the case in today’s marketplace.  Today, there are many variations of both term and whole life policies.  5 year term, Return of Premium, Mortgage Life are just a few examples of term policies.  Universal Life, Single Premium Life, 10-20 Year Pay Life are a few examples of whole life policies. 

How did these variations come to be industry standards?  As mentioned previous, consumers ultimately helped shape and determine what fit their needs best when it came to choosing life insurance. Consumers were tired of the old stand-by term and whole life options as one either didn’t necessarily fit their overall financial protection goals long term, or the other was just too expensive. 

Consumers wanted something more from both term and whole life. 

With term policies, Return of Premium came along as an option in which, depending on the term length selected, pays back all of the premiums paid if the death benefit is not used.  In other words, if you selected a 20 year Return of Premium of $100,000 and if you were still alive at the end of the term, all of the premiums paid in to keep the policy active is paid back, tax free.  We’ve had quite a few clients choose this term option as it provides “something” in case the death benefit is not used.  We’ve heard them say they look at it as another savings account of sorts.  Flexible, and still very affordable, we see a steady stream of clients aged 30-45 choose the Return of Premium option.

Whole life options have evolved as well and one of the most flexible options is Universal Life.  Universal Life might best be described as a sort of hybrid between term and whole life.  Term because of the flexible premium payment options.  Whole because of the cash value and death benefit till age 100. 

Universal Life is a great option for children as well.  One of the riders that can be attached to a Universal Life policy is a Guaranteed Insurability Option.  No underwriting or medical exam are required during the application and the child can take “ownership” of the policy at age 18, and increase the death benefit starting at age 21 and every 3-4 years after, up to age 49, with no additional medical exam or underwriting.  Plus, if they get sick or would normally be denied a life insurance policy later in life due to medical issues contracted later in life, the Universal Life policy cannot be canceled. 

Another great option for parents is the 10, 15, and 20 year paid life options for kids.  These policies are paid for a specified period of time – either 10, 15, or 20 years.  After that time, no more payments are required and the policy has all the benefit of a whole life – cash value and death benefit till age 100.  We like these policies since they generate cash value almost immediately and if purchased early enough in a child’s life, can have a generous amount of cash value that can used right around the time they are off to college, or to help purchase a car , or a nice down payment on a home. 

How do you know which policy is best for you and your family?  Talking to an experienced life insurance agent is usually the best route as they can help determine what your needs are and guide you in the appropriate direction depending on what your overall financial goals are.  Contact Joel at State Farm in Sun Prairie at 608-837-3783 or

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