Protective Life Insurance

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The most protective life insurance plan is difficult to truly define because there is such a wide range of options available and all of them offer distinct advantages and disadvantages over other plans. While many of us may be enrolled in some sort of group life insurance plan through an employer where the payout to beneficiaries might be 200% of your annual salary, this will not be enough coverage to ensure the financial security of your family and loved ones. When it comes to finding the most protective life insurance coverage, it will most likely be necessary for you to purchase a policy outside of work that will be more comprehensive in its protection plan.

Term Life Insurance

Dollar for dollar, the most protective life insurance coverage must be a term policy. Term life insurance is purchased for particular blocks of time and in some cases can be renewed at the end of the term with a review of premium pricing. The coverage amount varies along with the duration of the policy with term life insurance and no proof of health or physical exam is required in many cases. However, for large amounts of coverage, there may be a proof of health requirement and this will become more likely the older a person is when they seek coverage. No matter the coverage amount, term life insurance is still the best value for the most coverage.

Issues with Term Life Insurance

Some complaints about term insurance policies include:

• Does not build any cash value
• Policy often expires without payout so insured purchased life insurance that they ultimately did not need
• Does not offer flexibility with premium amounts

Return of Premium Life Insurance

Return of Premium life insurance is a type of term coverage where the insured receives a payout one way or the other. Either the insured will die during the term of the policy and the beneficiaries of the life insurance plan will receive the payout—or, the term of the insurance will expire and the insured will receive all the money that they paid into the policy.

Cost

A Return of Premium policy is more expensive than a typical term life insurance plan because there is a cash element similar to that found in whole, universal, or variable coverage. On average, you can expect to pay anywhere from 25-50% more than a typical term policy when getting Return of Premium coverage. The additional funds are used to invest in varying insurance investment funds. These insurance investments then build value over the course of the policy. However, should the policy expire at the end of the term, payout is typically limited to the total amount paid to maintain the coverage.

Benefits

Many people hated the fact that term life insurance was paid into for years and years with a very real possibility that the coverage would ultimately be unnecessary. Return of Premium solves that problem by giving the insured a guaranteed payout—either the policy holder dies and the beneficiary receives the face value of the policy—or, it expires and all the money paid into the policy is refunded.

Coverage

Normal term coverage still provides the most protective life insurance policy for the money. Whole, universal, variable, and even Return of Premium policies all involve a cash value component which makes the coverage much more expensive than any standard term coverage.

Although the other life insurance options do often provide the insured with a steady investment vehicle, many policy holders would be better off buying the amount of term coverage they need for financial protection while then investing in a mutual fund. In many cases, the insured would have lower management fees and be able to immediately put more of their money to work faster with a mutual fund than with some insurance investment format. In many cases, the entire first year of premiums merely cover management and account fees. It is common for the insurance policy to actually begin building cash value in the second year—not the first!

Deciding on a Policy

In truth, while term life insurance is a great option with excellent protection and reasonable rates—it may not be the best for everyone. The most protective life insurance plan will depend upon the assets of the insured and the particular type of protection they require. For most people, however, term life insurance tends to be the best way to get the coverage you need at the lowest possible price.