“Ok! I will be honest, I never liked dating”, admits Money Mama CEO, Melanie. But now, you’re probably wondering how in the world the topic of life insurance can be fun, and please indulge us for a minute – we promise, life insurance gets us excited (yes, it’s possible!) and you’ll likely learn a thing or two as well! To make it fun, we are going to talk about the different types of life insurance and will be comparing them to dating and sex. Yes, you read that right.. We have your attention now, don’t we? Let’s get started!.
There are two types of Life insurance: one that is called TERM and the other that is called PERMANENT.
Here are the differences and what you should be using them for:
TERM:
Term insurance is like dating on Tinder – it’s quick, it fulfills a need you have at the time, but then it will not move further along than “x” amount of time (years, in the case of insurance) when that relationship ceases.. If you aren’t healthy, then it becomes a bit trickier to find the perfect match for you – it isn’t impossible, but you will have to really bring the money out!! In insurance terms, you need to be healthy to qualify, but with some pre-exciting condition(s), you can find coverage. It all depends on what health issues you have. Much like how Tinder is structured to allow you to date multiple people at the same time (aka owning multiple term insurances), beware, as the fun might result in you ending up alone with no coverage down the road. There is always a possibility that you will fall in love and decide to proceed with one of your dates (aka deciding to convert one of your term insurance) and decide to get MARRIED, which leads me to the topic of Permanent Life Insurance, of which there consists of two subtypes:
WHOLE LIFE & UNIVERSAL LIFE:
Whole life and Universal life insurance are like a marriage. You are committed to staying for life (well technically… hahah me who has gone through two separations…but you understand, right?!) and growing the relationship. It will of course, last a lifetime, unless you decide to part ways (you are never obligated to keep any insurance contract, and once approved, you can cancel anytime (fees may apply). Whereas insurance cannot make or change your coverage. Once that commitment is sealed in a contractual agreement, then you begin to build assets together. In the case of Wholelife, you receive annual dividends (similar to a return of a premium). In the case of Universal Life, you pay the minimum cost of insurance and anything that is contributed above is then placed in a side account where the money gets invested in the market. So look at it this way: with Wholelife, it’s like having a joint account with the insurance company, and relying on them to make proper investments to get great returns – there is no investment management here because the dividend paid into the policy is directly linked with the insurance company’s performance. For Universal life, it’s like having your own personal account because you have the flexibility to choose your investment funds and change it up as you wish. (this is where an Advisor will help you make the proper choices).
Depending on your current situation, you might only be looking for a quickie (ah-hem, insurance solution), or maybe you are looking for that special person to spend the rest of your life with (insurance that fits your long-term needs). Either way, it is always good to speak to us who can guide you through the different avenues of life insurance. There is so much more than what is written here. There are a lot of different options to add like waiver on disability, child life and critical illness rider, etc…
Money Mama is happy to help you with all your “dating” needs…hahhaha – hope this made you smile!
Now go out there and find your match!