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Choosing The Right Life Insurance Retirement Plan For Your Household

Arranging a life insurance retirement plan requires a solid understanding of how different types of life insurance operate, but if you’re willing to research a few different types of policies, you can easily set up an appropriate plan for your household. When choosing a retirement plan, you can select term, whole or universal policies. Each of these options has different benefits for policy holders. Read also: College Student Life Insurance Policies: The Basics.

life insurance retirement plan

The Advantages Of Different Types Of Life Insurance

Before looking for insurance quotes, make sure that you understand the investment advantages of each type:

  • Term life insurance is the most popular type of life insurance. Under a typical term plan, you pay a regular premium for your death benefit. Your policy lasts from 1-30 years, and if you die within the policy’s term, your insurance provider pays a set benefit to named beneficiaries. If you do not die during the policy, you do not receive any of your premium payments back unless you have a special return of premium (ROP) policy or a convertible policy. Read also: Finding an Affordable Life Insurance Plan for Your Family.

  • Whole life insurance policies are arguably better life insurance retirement plans because they build some value over time. You do not forfeit your premiums. Instead, you get a slight return on your investment, depending on the amount of money that you put into your policy and your contract terms. Whole life insurance policies resemble more traditional investment plans, but they don’t provide the payoff of an IRA, 401(k) or other retirement-oriented investment strategy. A whole life policy pays a set benefit.

  • Universal life insurance is similar to whole life insurance, but it offers more flexibility as a life insurance retirement plan. Your premiums and death benefit may change under a universal life insurance policy. However, you might see more of a return on this type of policy. Read also: Quality Life Insurance Coverage For Parents.

Using Term Life Insurance As A Retirement Investment

Term life insurance policies have low premiums compared to any of the options listed above. While you will not get your premiums back if you outlive the term of your policy, you can still set up workable term life insurance retirement plans with the right strategy. For example, if you have another type of retirement plan such as the aforementioned 401(k), you can set the death benefit for your term life insurance policy as the projected value of your retirement account at age 65, then set the term of the life insurance policy to expire when the retirement account is fully matured.

If you are 40 and your 401(k) will have a value of $300,000 by the time you retire, for instance, you could set up a term life insurance policy with a $300,000 value and a 20-year term. If you die before your 401(k) matures, your household would receive the $300,000 benefit. After you reach age 65, you will no longer need your term life insurance policy, so you can let it expire without consequence. Of course, there are dozens of ways to develop an effective life insurance retirement plan. Whether you use term, whole or universal life insurance, you’ll get the best possible results by comparing policy options and insurance quotes before purchasing a plan. Read also: Life Insurance Later in Life.


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