The best type of life insurance depends on your individual insurance needs. Thus, you need to first determine how much coverage you need and then how long you need it for. These two things will allow you to match up the various types in the correct combination of coverage amounts, premiums, and how long you need the coverage for.
Here’s a few examples of possible amount/combinations:
When you focus on your life insurance needs in this fashion, we’re entirely focused on the death benefit over a period of time. We move away from investments, good or bad types, and all the other confusion you’ll be bombarded with when reading about the various types. Specifically, when approached this way, we only care about the cheapest life insurance policy for a specific amount, over a specific period of time.
When looking at life insurance premiums over time, the basic categories are ‘cheap now, but more expensive later’ and ‘more expensive now, but cheaper over the long run’.
Term Life Insurance has premiums that are level for a number of years (e.g. 10 years, 20 years, or 30 years). It’s inexpensive during the initial level ‘term’ timeframe, but prohibitively expensive after that. So it’s very suitable for people looking for life insurance for 10,20 or 30 years, but don’t want or need coverage after that. So we take it while it’s cheap, then when it gets expensive, cancel it.
Permanent life insurance has premiums that are level for life. It’s more expensive than term upfront, but because the premiums remain level and term premiums go up, over the long term it becomes cheaper than term.
So, if you’re looking for life insurance for a defined period of time, the best type of life insurance will be term life insurance. If you’re looking to keep life insurance over your entire life, the best type will be permanent (and to add to this, make sure you’re looking at fully guaranteed permanent life insurance – if it has non-guaranteed portions, or investment related, proceed with caution). Now, lets apply this to the above three scenarios to get the best type for each situation.
It’s important to remain focused on the coverage amount and timeframe in order to choose the correct type – don’t get distracted. If you stay focused on these things, you’ll assure yourself of having the best life insurance for your individual needs. For most families, term life insurance will be the correct solution.