You’ve been a diligent researcher in your quest for the best life insurance policy for your family, and during that time you’ve probably come across a lot of life insurance lingo.
Death benefit. Rider. Underwriting. Health exam. Sound familiar?
You also probably came across the various types of life insurance, from permanent and whole to term life insurance – the most common types of life insurance policies you’ll find on the market. And if you have an especially keen eye, maybe you noticed that at PolicyGenius, we only offer term life insurance policies.
So what gives? We let you search, compare, and apply for policies from the nation’s top-rated life insurance companies, but you only get the option of one type of policy?
That’s right. And there’s actually a good reason for that: if you just need financial protection, term life insurance is hands-down the best option for your family, your wallet, and your peace of mind.
Life insurance should be simple
Your goal with life insurance is simple: get your family the protection they need in case the worst was to happen.
Our goal at PolicyGenius is equally as simple: get people the life insurance they need, and make them feel good about their choices.
If the aim of life insurance is so simple, why does the process of actually buying it always seem so complicated?
Jennifer Fitzgerald, the CEO and co-founder of PolicyGenius, doesn’t think it should be.
"One of our company values is to live by the Golden Rule – meaning we operate with integrity with respect to each other and our customers," Fitzgerald says. "An important way in which we live that value is to sell only products that we believe in, that deliver real benefits to our customers. That's why for life insurance we focus on only on term life insurance."
Term life insurance is "pure" life insurance: when you pay your premium, you’re just paying for the cost of death benefit that your family would receive in the event of your death. You choose a coverage amount and the length of time the policy lasts (the term), pay premiums for the length of the term, and if you pass away while covered the death benefit gets paid out. If you outlive your coverage, you don’t pay the premiums any more. Simple as that.
When it comes to whole life insurance, things get...complicated.
How so? Well, you have to worry about the cash value component of the policy. You have to worry about riders and stipulations about how you can withdraw money to use. You have to worry about additional fees. You have to worry about surrender charges and policy loan interest. All of that can add up to not getting the growth that’s promised with a whole life insurance policy, if you don’t hold it for long enough.
Life insurance is supposed to give you peace of mind. Do you really want to be worrying that much over it?
Term life insurance is better for your future
Of course, just because something is easy doesn’t mean it’s necessarily better. In this case, though, term life insurance likely is the better product for you.
First of all, it’s cheaper than whole life insurance. As in, whole life insurance can cost up to 4x what term life insurance does. And when you’re trying to fit life insurance into your budget, that can count for a lot. Fitzgerald agrees. "Term life provides an affordable financial safety net for families."
A lot of people look to the savings aspect of whole life insurance – the cash value component that grows over the years – as its saving grace. Since people are typically bad at handling their money, a product that acts as a savings vehicle and insurance seems to be the way to go. It’s essentially forced savings. Unlike other forced savings vehicles, like a mortgage, when it comes to whole life insurance it’s likely that you’ll be unable to afford it at some point and you’ll need to cancel the policy, losing much of the money you’ve put into it.
Between big withdrawal fees compared to other retirement products and a return that just doesn’t match up when compared to other investments, not to mention the premiums you’ll be paying on an insurance policy you probably won’t need in your golden years, there are more prudent ways to allocate your money, like a combination of a cheaper term life policy and a 401(k) or IRA. In fact, common sense advice can get you the financial protection you need without a whole life insurance policy.
In the interest of transparency (we’ll get to that more in a minute): are there people out there for whom whole life insurance works? Absolutely. But for 80-90% of people looking for life insurance – people who don’t have complex financial needs, who don’t need the cash component to cover an estate tax or endowment, who don’t have the means to pay the high premiums of whole life insurance – term life insurance is the best path to protection.
You should be able to trust your life insurance
A lot of people are wary when it comes to experts giving financial advice. You might be one of them. If you are, I can’t really blame you. After all, it was only this year that a law was passed stating that financial advisors and brokers handling your money have to act in your best interest. That’s not particularly inspiring.
That same wariness can apply to life insurance when it comes to whole life insurance policies. The higher cost of whole policies means that, from a commission standpoint, it’s better for your agent if you buy a whole policy rather than a term. It also means that people can second guess their choice and avoid buying life insurance altogether. Even life insurance can become a hassle if you’re forced to jump around from company to company, not sure if you can trust what you’re being told.
That’s why our in-house agents work on salary rather than just commission. Whether you’re looking for $25,000 worth of coverage or $10,000,000, or agents have one goal in mind: making sure it’s the right policy for you.
At PolicyGenius, we know that part of making you feel good about buying life insurance is a priority on transparency. You should know what you’re getting. That’s why we offer resources like the Genius Center blog, our Learning Center, and insurer reviews. It’s why you can review policies side by side and choose the one that’s right for you – not just the one that we say is right for you.
"We could make more money by selling other life insurance products – like whole and universal life," says Fitzgerald, "but we don't think that's the right solution for the vast majority of families who need life insurance protection."
With our Insurance Checkup, you can see where you financial gaps are and what that means for your insurance needs. And if a lower-coverage, lower-cost policy is what it takes to fill those gaps, that’s what our agents will make sure you get.
You should be able to trust your life insurance policy and its ability to protect your family. You should also be able to trust the company you’re buying it from. With term life insurance from PolicyGenius’ top-rated life insurers, you can rest assured that you’re getting what’s best for you.