I’m feeling overwhelmed by all the biased articles trying to figure out what type of insurance I should get and who to go with, and I could really use some help. I’m 31 years old, 5’5", 200 lbs, in good health, but I have a chronic disease in my medical history that is still inconclusive (one endoscopy said I had it, another couldn’t find any trace, and I have to wait for a third in a few years). I’m a non-smoker with no kids and no plans to have any, but I want my nieces, nephews, parents, and siblings to receive my benefits when I pass. I currently earn $70k, but that will increase significantly next year, and I want the option to borrow against the policy.
Different people have different needs when it comes to insurance.
Term life insurance offers the highest death benefit for your premium but is not very different from other products.
Whole life insurance is straightforward. You choose how long you want to pay into it, and once that’s done, you don’t pay anymore. You also have the option to borrow against it. This is a fixed product, meaning the death benefit remains the same.
Indexed Universal Life (IUL) insurance is tied to the market, as “indexed” indicates. It’s important to understand the difference between fixed and market-based products because of inflation. For example, $100,000 today is not the same as $100,000 in the future. With IUL, you can adjust the death benefit and invest in the market, but be cautious not to invest too much since it still needs to qualify as a life insurance product. Familiarizing yourself with the 7702(b) tax code is essential if you’re considering this option.
IUL can also be compared to Variable Universal Life (VUL) insurance. The key difference is that IUL protects you from net losses in a down market, but it also limits your earnings. VUL, on the other hand, has no earning limits.
So why invest in life insurance instead of just the market? One major reason is the tax advantages that come with life insurance.
If you don’t have dependents, you generally don’t need life insurance. If you’re looking to leave a legacy, consider investing instead.
If you’re interested in a policy for infinite banking, structure it around your increasing income. The key factor is how actively you plan to manage the policy in the short term. At your age, Variable Universal Life (VUL) insurance should be your go-to option. I created a table to help with choosing the right policy, which you can find here: Choosing a Policy.
I’m not fully aware of your complete health history or financial goals.
First, if you have inconclusive test results or pending tests, insurance companies may delay coverage.
Second, what is your budget for life insurance that you can comfortably afford each year? Your health history might affect the offers you receive. If companies rate you based on your health, it could increase your premiums and limit your options.
It would be a good idea to complete all necessary medical testing, ensure your health records are in order, and then revisit this topic in the future.
Second is hard because it depends on what the plan benefits are. I’d be willing to pay more if the benefits were more attractive. But I also don’t know what would be too low.