What Type of Life Insurance Is Right for Me?

By Scott Nyerges

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Find the Best Life Insurance Plan for You

Find the Best Life Insurance Plan for You

You’ve decided to buy a life insurance policy for the financial protection it offers. But which type of life insurance is right for your needs? This guide will outline the different types of coverage available and explain some of the differences between them.

What Kinds of Life Insurance Policies Are There?

There are two principal types of life insurance: term and permanent. Term life insurance provides coverage for a specific time period or until you reach a certain age. By contrast, permanent life insurance lasts a lifetime. In both cases, the death benefit is guaranteed – that is, it will be paid to your beneficiaries after you die – provided you’ve kept the policy up to date and premiums have been paid on time.

Term Life Insurance at a Glance

A term life insurance policy typically has the following features:

• Duration (term) of one to 30 years or longer or until a certain age
• Level premiums, meaning they won’t change while the policy is in effect
• Policy rates that vary based on your age and general health
• Relatively less expensive than a permanent life insurance policy. 
• No savings or investment component, meaning there’s no cash value to withdraw or borrow against
• Can be purchased without a waiting period or medical exam in many cases
• It May be converted to a permanent life insurance policy in some instances
• May refund premiums if the insured is still living after the term ends

Best Term Life Insurance Companies of 2022

Permanent Life Insurance at a Glance

There are three primary types of permanent coverage available: whole life insurance, universal life insurance, and variable life insurance. Policy prices are based on your age, gender, overall health, and other personal data. In most cases, you will be required to get a medical exam before purchasing coverage.

All three types of policies have a cash value that grows at a tax-deferred rate and can be accessed in the form of a loan or withdrawal while you’re still alive. You may also be able to access funds by surrendering the policy or using the cash value to pay your premiums. Utilizing or accessing the cash value in any way can directly impact the death benefit or have tax implications.

Universal life generally has the following features:

• Premiums and death benefits can be adjusted
• High monthly premiums but cheaper than whole life
• Cash value grows at a set minimum or market rate, depending on policy and insurer

Variable life generally  has the following features:

• Premiums may be level or variable
• The policyholder can invest cash value account in stocks, bonds, and other financial instruments, depending on policy and insurer
• The cash value can grow or shrink, based on market performance
• May carry fees or surcharges related to investments

No-Exam Life Insurance at a Glance

As the name implies, no-exam life insurance does not require a medical exam to purchase a policy. However, that lack of a detailed health history means the insurance company is assuming greater risk in issuing your policy. As a result, premiums can be very high when compared to the amount of coverage provided. However, if you do not want to get a medical exam or have been denied coverage in the past for health reasons, a no-exam life insurance policy may be an option to consider.

There are two main types:

Simplified issue of life insurance

• Can be a form of term or whole life insurance
• Must answer a few basic health questions before purchase
• Acceptance is not guaranteed but likely if you meet basic criteria
• Coverage amounts are usually $500,000 or less, depending on the insurer and policy

Guaranteed issue of life insurance

• Intended for older adults (ages 50 to 80) or those who don’t qualify for standard life insurance
• No health exam or medical questionnaire required 
• Acceptance is guaranteed except in rare circumstances
• Death benefits are often graded, and the full amount may not be available for up to three years after the policy is active
• Coverage amounts usually $25,000 or less, depending on the insurer and policy
• Lasts for the insured person’s lifetime, provided premiums are paid regularly

What Kind of Life Insurance Is Right for me?

Choosing the right life insurance depends on the type of policy you want, how much coverage you need, and how high of a monthly rate you can afford. Here is a look at some of the major differences between policy types. Bear in mind that policy specifics will vary from company to company.

What Other Types of Life Insurance Can I Buy?

If you’re not interested in traditional term or permanent life insurance, but still want to provide your loved ones with some financial security, one of these policy types may be worth considering:

Final expense insurance 

• A form of permanent life coverage intended for – but typically not required to be spent on – end-of-life costs such as cremation, burial, or medical expenses
• Death benefits are low, typically $25,0000 or less
• The death benefit is guaranteed, provided the policy is up to date
• No medical exam is required

Accidental death and dismemberment insurance

• Provides a death benefit only if you are killed, dismembered, or maimed in an accident or other unforeseen circumstance as defined by the policy
• Does not cover death due to natural causes, illness, or disease
• Offers death benefits of up to $1,000,000, depending on the insurance company
• No medical exam is required

Group life insurance

• Typically offered at little or no cost as part of an employee benefits package or to members of a professional, religious, or civic organization
• Is temporary in nature because benefits typically end when your employment, membership, or group affiliation ends
• Coverage amounts are usually low (e.g. one or two times the annual salary)
• No medical exam is required

Why Should I Buy Life Insurance?

Not everyone wants or needs life insurance, but those who choose to buy life insurance typically do so for one of three reasons:

• Cover end-of-life costs like cremation or burial
• Replace income or wages to support beneficiaries
• Leave a financial legacy 

There are life insurance policies that can fulfill all of these needs. Before you buy, however, you’ll want to find out how much life insurance coverage you can afford. Our online life insurance calculator can help get you started.