Money Girl explains universal and variable life insurance and gives 5 tips for buying insurance.
Money Girl
313 MG Tips to Buy Permanent Life Insurance (Part 2)
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This is the second episode in a two-part series about whether you should buy permanent life insurance. In part one, I covered the differences between permanent and term life. And I reviewed one common type of permanent policy called whole life. So be sure to listen to podcast number 312 for more information if you haven't done that already. In this episode we'll cover two more types of permanent life policies, universal and variable. Plus you'll learn five smart tips to buy permanent life insurance if it's right for you. There are three main types of permanent life insurance. Whole, universal and variable. Although the benefits they provide are different, each type covers you for your entire life. Term life insurance on the other hand only pays a benefit if you die during a specified period of time such as 10 or 20 years. So let's cover the three main types of permanent life insurance. I'll just give you a summary on whole life since we covered that in part one. Whole life gives you a guarantee death benefit and a guaranteed rate of return on your cash value when you pay a fixed annual premium. This is the most straightforward type of permanent life policy, but it's also the most expensive because it comes with no risk to the buyer. The second type of permanent life insurance is called universal life. It doesn't offer the guarantees of a whole life policy, but it has much more flexibility. For instance, you can reduce the death benefit of a universal life policy to save money as your needs change from year to year, or you could increase the benefit as long as you're still healthy and keep the same policy. You can even reduce or temporarily suspend premium payments on a universal life policy if you have a financial hardship, or you can pay more into the policy to take advantage of higher returns when interest rates go up. When you buy a universal life policy, you're given a sales illustration that estimates your annual premium that's necessary to fund the policy for life. Though premiums are less expensive than a whole life policy, they aren't guaranteed. The cost of the policy could increase up to a maximum amount if interest rates go down. And if you can't afford to pay those higher premiums, you may be forced to cancel the policy. This is the major downside of universal life. The third type of permanent life insurance is called variable life. This is a policy in which your cash reserves are invested in securities such as stocks, bonds, and mutual funds. It's similar to universal except that you choose how to invest your money from a menu of options. Variable life gives you the most flexibility and the most risk of all the permanent policies. If the investments you choose perform well, your cash value could skyrocket above what you could typically earn from a whole or universal life policy. But the bad news is that if your investments don't perform, you could lose part of your cash value. And if your cash value declines, it's up to you to make up a loss by paying higher premiums to fund the policy for life. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans or travel. Planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but policy genius makes the process a breeze. With policy genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy genius's technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork, and advocate for you throughout the process. It's never too late to plan ahead. Go to policygenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's policygenius.com. AI might be the most important new computer technology ever. It's storming every industry and literally billions of dollars are being invested. So buckle up. The problem is that AI needs lots of speed and processing power. So how do you compete without cost spiraling out of control? It's time to upgrade to the next generation of the cloud. Oracle Cloud Infrastructure or OCI. OCI is a single platform for your infrastructure, database, application development, and AI needs. OCI has four to eight times the bandwidth of other clouds, offers one consistent price instead of variable regional pricing. And of course, nobody does data better than Oracle. So now you can train your AI models at twice the speed and less than half the cost of other clouds. If you want to do more and spend less like over eight by eight and data bricks mosaic, take a free test drive of OCI at Oracle.com/advance. That's Oracle.com/advance. Now trending fall and DSW is here with all the obsession where these shoe trends you need in your closet. Feeling fierce? DSW's got bold snake print boots and a retro sneaker with animal print details. Going for demure? Kitten heels are the eye-catching yet walkable heel all over your feet and all over DSW from edgy motivates to sweetly simple valley flats. Find the must own shoe trends of the season right now at your DSW store or DSW.com. So to sum up, a permanent life insurance policy isn't for everyone. However, if you want to make sure that certain people, organizations, or the taxes on your estate are taken care of no matter when you die, consider buying one. There are five tips for buying a permanent life policy if it's right for you. Tip number one, buy permanent life insurance only when you have a need for it never purely as an investment. There are hidden upfront fees and expenses which significantly reduce the potential return on your cash value. Tip number two, when buying universal life, choose a premium payment based on a very conservative interest rate such as three or 4%. This will prevent you from having to pay higher premiums down the road. Tip number three, consider buying term life insurance with the option to convert to permanent life. Since you don't know how healthy or unhealthy you'll be at the end of a term, having the option to switch to permanent insurance will allow you to maintain life coverage. Tip number four, a general rule of thumb is to buy life insurance that's at least 10 times your annual income. If you have children or other family dependents, always err on the side of buying too much coverage rather than too little. And tip number five, if you get life insurance through work, don't rely on it exclusively. Although you can get a limited amount of group life coverage even if you're in poor health, if you leave the company, you lose the insurance. Since life insurance is a complex financial product, be sure to do your homework and ask lots of questions before buying it. But don't procrastinate buying a policy. If your health takes a turn for the worst, life insurance could become unaffordable. It's really easy to get life insurance quotes using a free site like insurance quotes.com. No matter if you earn an income or are a stay-at-home parent, consider how your death would affect the finances of those who survive you. If a spouse, dependent, or any other loved one would suffer a financial loss without you, you're the perfect candidate for life insurance. To read a transcript of this show, connect with me on Facebook or Twitter or sign up for the free Money Girl newsletter. Just visit the Money Girl page at quickanddirtytips.com. This is episode number 313, called Tips to Buy Permanent Life Insurance, Part 2. I'm really glad you're listening. That's all for now. Courtesy of Money Girl, your guide to her richer life. Where'd you get those shoots? Easy. They're from DSW. Because DSW has the exact right shoes for whatever you're into right now. You know, like the sneakers that make office hours feel like happy hour. The boots, the turn grocery isles into runways, and all the styles that show off the many sides of you. From daydreamer to multitasker and everything in between, because you do it all. In really great shoes. Find a shoe for every you at your DSW store or DSW.com.