Life Insurance, US (February 2023)
Updated: Feb 21
Dr. Mercy Otieno, Ph.D. Economics and Finance
@ International Foundation for World Freedom
According to Forbes, life insurance is a contract between an individual and an Insurance company, where individual dependents or family members receive a specified amount of money in the event of his/her death. In turn, the insured pays a premium for life or a set period.
Who needs life insurance? How much life insurance do you need? Ideally, not everyone requires life insurance, especially if you have no financial dependents/debts and enough assets to pay the cost of settling your estates. The amount of life insurance you need will depend on your situation such as:
The financial needs of your survivors in terms of education and survival (if you’re the head of the household)
The investments you have already
The amount of social security payout
Other insurance offered through your employer
Types of life insurance
Term life insurance cover – This is insurance that runs for a specific period or expires once one reaches a specific age. It provides a death benefit to your dependents for a set period. This cover offers other advantages such as the ability to choose the period and payment schedule (making payments annually, semiannually, monthly or weekly). In case you die during the term, your family receives tax-free income from your policy, and it also provides the flexibility to convert it into a permanent life policy.
Permanent Life Insurance- This insurance lasts your entire life and does not expire as long as you continue to pay the premiums. The premiums stay the same your entire life and the death benefit payout to your family is guaranteed. Most companies will require a medical exam before one is approved for coverage.
There are several types of permanent life insurance. These include:
Universal Life Insurance- This is a permanent life policy that lasts the insured’s entire life. It has an investment saving option and fixed low premiums (Similar to term insurance).
Variable Universal Life Insurance- This offers a combination of life insurance and investment accounts. Where your cash value grows when the market performs well and could lose value when the market performs poorly. Thus, your cash value can go up or down depending on the market occurrences.
Indexed Universal Life Insurance- This option allows you to build wealth while leaving behind benefits for your loved ones. While you do not lose money in the market and your gains are tax-free there is a cap on how much you can make from your investment. Some firms allow you to borrow from your policy without affecting your credit score.
Individual life insurance policies can be purchased directly from the company or through the company's insurance agents. Some companies/employers also offer group life insurance through your job. You can also get life insurance through a group to which you belong.
The companies below are some of the best in 2023 and their niche areas, according to Forbes magazine;
Pacific Life – Best for Variable Universal Life Insurance
Penn Mutual – Best for Seniors
Protective – Best for Universal Life Insurance
Mutual of Omaha – Best for Gen x & Millennials
Transamerica – Best for Reliable Policy Illustrations
Lincoln Financial – Great For Estate Planning
Securian Financial/Minnesota Life – Best For Indexed Universal Life Insurance
Symetra – Best For term Life insurance Rates