What Is Full Life Insurance

If you are preparing to purchase a new life insurance policy, you understandably may be leaning toward getting full life insurance. This is a term that implies full coverage that may meet all of your needs, but you should understand what this coverage actually provides and what its pros and cons are before you finalize your plans. Asking what is full life insurance is a great starting point.

How is Full Life Insurance Different?

Full life insurance is an appropriate name for this coverage because it spans across your full lifetime in most cases. It is more commonly referred to as permanent life insurance, and universal and whole life insurance products both fall under this umbrella. Coverage remains in effect until you pass away of if you stop paying the premium. With some policies, the provider may terminate the policy when you reach the age of 100 and will pay out the benefits at that time.

The most common alternative to full life insurance is term life coverage. Term life insurance provides coverage for a specific period of time, and term lengths usually are available between 10 and 30 years. At the end of a term life policy, the coverage simply ceases. Term life insurance is also cheaper than you think.

What Are the Benefits of Permanent Life Insurance?

Before deciding if a full or permanent life insurance policy is right for you, you should understand its benefits compared to other coverage options. Many people prefer permanent life insurance because it provides peace of mind that the beneficiary will receive benefits regardless of when the insured passes away. These policies usually have a cash value component. A portion of each premium payment is applied to an interest-bearing account. This account can grow substantially over the years. The insured may borrow against it as desired, and common uses include buying investments, paying for a child’s college education, paying off debts and more. Many people appreciate the fact that this money is available without having to apply for or qualify for financing.

What Are the Drawbacks of Permanent Life Insurance?

Just as there are significant benefits associated with permanent or full life insurance, there are also a few drawbacks. Because permanent life insurance remains in effect without an expiration date and because of its cash value component, the premium is substantially higher than a term policy with an equivalent death benefit. However, if you purchase permanent life insurance younger in life and when you are in good health, you may lock in an affordable premium for the remainder of your life.

What is Full Life Insurance

When Would Another Type of Coverage Be a Better Option?

As beneficial a full life policy may be, there are reasons why it may not be right for you. These are among the more common reasons why another policy type may be a better option:

  • The premium for permanent life insurance is not affordable. While you may prefer to enjoy the benefits of permanent life insurance, it may be better to purchase coverage with a premium that is manageable for your budget.
  • Your need for coverage will cease within the next one to three decades.
  • You have no foreseeable need for the cash value component of permanent life insurance.
  • You do not want to endure a health physical exam in order to qualify for permanent life insurance.

Keep in mind that there are many other types of coverage that may be more affordable and that may meet your specific needs. In addition to term life insurance, you may choose between end-of-life coverage, no-exam term life insurance coverage and others. If you are not certain that permanent life insurance is in your best interest, it makes sense to explore all of the options.

On the other hand, if you prefer to purchase full or permanent life insurance, be aware that you can adjust the premium in several ways. For example, you can set a lower death benefit amount to directly reduce the premium. With some types of policies, you may adjust how much of each payment is applied to the cash value component. Buying life insurance when you are younger and healthier will also help you to set up an affordable premium amount.

The life insurance policy that you purchase will directly affect your budget for many years to come. If you select a policy with a cash value component, it will contribute to your increasing net worth over the years. More than that, the death benefits amount that you select will directly impact your loved ones after your passing. With this in mind, it makes sense to explore all of the options thoroughly and to set up the policy that works best for your needs and budget.