Choosing the right life insurance policy

When considering how to choose a life insurance policy, understanding the various coverage options and what they can offer is an important step. Selecting life insurance that fits your needs may require some homework, but understanding the different types of life insurance is a good place to start. Here's a look at the most common policies and what benefits they typically provide.

What to consider before buying a life insurance policy

Before buying a life insurance policy, there are several features to consider, including the premium costs, coverage amount, policy term, living benefits, and whether the policy builds cash value. As you compare the different types of life insurance policies, think about your financial goals and family needs and what type of coverage may work best within your budget.

Breaking down life insurance differences

The decision about how to choose life insurance coverage may seem difficult, but as you explore the different types of life insurance policies, it’s easier to see how they may align with personal financial goals. It can be helpful to start with the two main categories: term life insurance and permanent life insurance. Each has unique features, benefits, and cost structures. Since selecting life insurance can meet specific needs throughout different stages of life, understanding how each type functions can help determine which type provides the best balance of protection, flexibility, and financial support.

Term life insurance pros and cons

Term life insurance includes level premiums that remain fixed for a specified period, known as the term. Term coverage provides a death benefit, which is a lump sum payment made to a designated beneficiary if the insured passes away while the policy is active. This benefit is generally tax-free and can help cover expenses such as funeral costs, outstanding debts, mortgage payments, everyday living expenses, or charitable donations.

Some policies may include the option to convert to permanent coverage before the term ends. Once the term expires, the policy may either terminate or renew on an annual basis, typically at a higher rate. Depending on the provider, policyholders may have the option to renew for a new term or convert to a permanent policy for continued coverage.

Term life insurance differences and policy highlights

•  Provides a generally tax-free death benefit for loved ones
•  Easier to understand
•  Typically low-cost life insurance

Is a term life insurance policy right for me?

Term life insurance can be a great choice for many people because it’s simple and can be cost-effective. It can be a good match for those who are seeking budget-friendly coverage or individuals early in their financial journey, such as young adults in their 20s or 30s. For a closer look at how term life insurance works, check out the video below.

Guaranteed universal life insurance pros and cons

Guaranteed universal life insurance is a form of permanent coverage that that allows you to guarantee a death benefit to any age up to a maximum age as stated in the policy, as long as the premiums are paid and the policy remains in force. Guaranteed universal life is not designed to generate cash value.

Guaranteed universal life insurance differences and policy highlights

•  Can provide a guaranteed death benefit for your whole life
•  Death benefit passes to beneficiaries generally tax-free

Is a guaranteed universal life insurance policy right for me?

A guaranteed universal life insurance policy may be right for you if you need lifelong death benefit coverage and want fixed, generally lower premiums than other permanent life insurance options. It may be a good option for those seeking lasting coverage without the higher costs of whole life insurance, making it a more budget-friendly long-term solution.

Indexed universal life insurance pros and cons

Indexed universal life insurance (IUL) provides death benefit protection while also offering the potential to accumulate cash value. The interest credited to the policy is linked to the performance of selected stock market indices, allowing for tax-deferred growth. Although growth is based on a stock market index, the premium is not actually invested in the market or in the applicable index. With an IUL product, the policyowner can take advantage of the upward movement of a selected stock market index while being protected from a downward performance through the power of the 0% floor, meaning the index credited will not be less than zero percent. This feature can help provide stability even in challenging market conditions. The upside is limited by either an index cap rate or an index participation rate. The index cap rate is the maximum interest rate that could be credited to the policy. The index participation rate is applied to the index change in order to calculate the index credit. The premium paid in the policy is not directly invested in any index or the stock market.

Indexed universal life insurance differences and policy highlights

• The death benefit is not generally subject to income taxes for the beneficiary
• Offers the potential to grow cash value
• The amount credited to the cash value grows tax-deferred without directly investing in the market
• Flexible, adjustable premium, and death benefit amounts as needs change
• It can be an expensive product depending on your goals

Selecting life insurance like indexed universal life can be especially attractive for those who desire a death benefit, with additional benefits like growth potential and downside protection.

Is an indexed universal life insurance policy right for me?

If interested in providing a death benefit for your beneficiaries with additional benefits, an indexed universal life insurance policy might be attractive to you for its upside growth potential and downside protection. Watch the video below if you want to learn more about indexed universal life insurance.

Exploring different types of life insurance policies with Midland National

How to choose a life insurance policy can seem complex, but Midland National is here to help simplify the process. Working with a financial professional can provide clarity and guidance, making it easier to explore coverage options and find a solution that fits your specific needs and goals.

Neither Midland National Life Insurance nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.

The tax-deferred feature of an indexed universal life policy is not necessary for a tax-qualified plan. In such instances, you should consider whether other features, such as the death benefit and optional riders make the policy appropriate for your needs. Before purchasing a policy, you should obtain competent tax advice both as to the tax treatment of the policy and the suitability of the product.

Indexed Universal Life Insurance products are not an investment in the “market” or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance. Life insurance policies have terms under which the policy may be continued in effect or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. For costs and complete details, refer to the policy or call or write Midland National Life Insurance, One Sammons Plaza. Telephone 800-923-3223.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

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