Different types of life insurance vary in price and the benefits that they provide. Once you've calculated how much insurance you need and how much of your budget can be allotted to a life policy, explore the different policy types to see what might work best for you.
Term life insuranceTerm life insurance: Typically, a term policy rather than a permanent* policy will offer you lower premium payments and may be preferred by those on a limited budget. However, if you have a need for a $500,000 policy and the price of term is still a stretch, a good rule of thumb is to buy as much life insurance as you can comfortably afford.
Permanent life insurancePermanent life insurance: Even though permanent insurance typically costs more than term, it can provide cost-effective savings in the long run if your budget will allow for the extra expense to get a policy started early. Remember, a term policy is temporary, and the coverage and low premiums you pay now will come to an end once the term expires. And because life insurance premiums are based on age, health, and other factors, you could be looking at paying substantially more if you decide to purchase additional insurance once your term policy ends.
Combining term and permanent life insurance: For some, the combination of term and permanent life insurance can be a way to get the amount of coverage you need, lock into a fixed rate, and secure a policy that won't expire. For example, if you needed $500,000 of whole life insurance for the next 20 years (new mortgage, young dependents still at home, etc.) but could budget for only half of that amount, you could split the limit between a permanent policy and a 20-year term policy. This would provide you with the full $500,000 at the time it's needed most, and when the term policy expires you'll have a smaller permanent policy that would continue as long as the required premiums are being paid.
Life insurance policy riders
Many people don't know that there may be policy riders available for both term and permanent life insurance that can be added onto a policy to help you affordably get the coverage you need.**
A term conversion rider lets you convert term life insurance into permanent life insurance without undergoing a medical exam. It can be especially attractive to young people starting careers and families who need life insurance but don't have enough money yet to secure all the coverage with permanent life insurance.
A guaranteed insurability rider lets you purchase additional life insurance coverage at a later date (and at specified intervals) without undergoing a medical exam or providing any evidence about your insurability. Because you never know how your health could change or if you might want to buy more life insurance later, this could be a good option.
A level term rider lets you add to a permanent policy a fixed amount of term insurance for a specified period of time only. It allows you to have the coverage limit you need at a specific time when you need it the most.
* As long as required premium payments are timely made.
** Every insurer, company, and life insurance policy is different. Not all policy riders are presented here, and many may not be available, even through Protective Life.