Life insurance is such a personal topic of conversation that even the seasoned physician investor may not fully understand the options available. Here is a brief overview of the three main buckets of insurance planning.
Term Life Insurance. This type of insurance offers temporary coverage with relatively low monthly premiums, which are often based on age, health, and benefit amount. As explained by Money Geek, coverage with a term life policy typically lasts 1-30 years. Term policies are usually a good option for a physician looking for a low monthly premium with a benefit amount that will help provide security for his/her family should the worst happen.
Whole Life Insurance. For some physician investors, a whole life policy is more than an insurance plan; it’s a source of diversification that can provide security, as well as tax advantaged savings. As long as you continue to make the payments on the whole life policy, the policy is permanent and can even pay dividends. According to Bankrate.com, once you hit the minimum required cash value through payment of premiums, that money is available to you as a loan or a withdrawal; there may, however, be taxes incurred, so check with your insurance agent before you move forward with accessing funds. It is important to note that whole life insurance premiums are significantly higher than term—you have the benefit of a permanent policy, but that security comes with greater payments up front.
Universal Life Insurance. Like whole life insurance, universal life is also a permanent policy, so long as premium payments are kept up. What differentiates universal from whole is flexibility. With a universal life insurance policy, like a whole life policy, you can grow cash over time, making it a potential vehicle for savings diversification. Unlike whole life, however, you can choose the premium level, the death benefit, and whether to opt for an adjustable plan. Index universal life plans, for example, are linked to the stock market and you may be able to benefit from strong growth, which of course comes with the possibility of volatility.
Whichever type of life insurance policy you decide to purchase, be sure to partner with a life insurance agent who takes the time to clearly explain your options. Your insurance strategy should be individualized to meet your needs and those of your family.
