When shopping for life insurance, it’s imperative that you know exactly what you want.
While you may think you want one type of policy, it may actually be something else you are looking for.
For example, there are people who believe they want whole life insurance, just to find that this isn’t exactly what they are hoping for. What they actually want is a universal life insurance policy that lasts forever.
This is a tricky situation, as you need to understand the differences between whole and universal life insurance. If you assume these are one in the same, you could make a decision that works against you in the future.
What is Guaranteed Universal Life Insurance?
Guaranteed universal life insurance (GUL) is cheaper than whole life insurance. For this reason, it attracts many consumers who feel that they are unable to afford a whole life policy.
In addition to a lower premium, with guaranteed universal life insurance you know that a death benefit will be paid out upon your death.
While this sounds like a great alternative to whole life insurance, there are some reasons why it’s not always the best choice.
Primarily, you don’t have access to the cash value or the ability to skip payments in the future. For this reason, you are leaving quite a few benefits out on the table.
If you want nothing more than death benefit protection, a guaranteed universal life insurance policy may be the way to go. It’s not as cheap as term life insurance, but you have the peace of mind in knowing that your death benefit will always be in place.
Should You Buy a Term Policy?
There could come a point when you find that you are unable to afford any type of permanent protection. While this may change in the future, it doesn’t mean you should wait around and hope for the best down the road. You still need protection.
This is where term life insurance comes into play. Since it’s more affordable than both guaranteed universal and whole life policies, you can find something that fits into your budget.
If you are going to purchase a term life insurance policy, here’s a general rule of thumb: get coverage that is equal to a minimum of 10x your annual income. So, if you earn $50k per year, your term life insurance death benefit should be $500k or more.
Tip: if possible, opt for 20x your annual income. This will give you even more peace of mind.
The Choice is Yours
At first, you may assume that whole life insurance is exactly what you have been looking for. But then something happens: you find that there are other types of policies available, and that you may not be able to afford permanent protection.
While whole life insurance offers more benefits than any other type, it’s also the most expensive. This is why you should keep an open mind with both guaranteed universal life insurance and term coverage.
In the end, the choice is yours. The best thing you can do is review your finances, set a budget, and shop for a policy that gives you as many benefits as possible for the price you can afford to pay.