What's the Right Life Insurance?

Many doctors and dentists wonder what kind of life insurance coverage is most appropriate for the individual circumstances. In large part, the choices you make about life insurance involve finding the right balance between the lowest cost possible and the most appropriate coverage for you.

Term life insurance

There are two primary types of life insurance policies:

• Policies that provide a death benefit for survivors after you die, but no other features, typically referred to as term life insurance.
• Policies that combine a death benefit for survivors with a cash value that can be accessed while you are still living, often referred to as whole-life or permanent life insurance.

Term life insurance typically has lower premiums and can help replace your income stream for a beneficiary after your death. The younger and healthier you are when first purchasing a policy, the less costly it can be. This is often a choice medical professionals make as a first step into life insurance. Newly married couples may buy this type of policy to provide a financial cushion in the event one spouse dies.

Also, the amount of coverage that seems sufficient early in life is likely to increase once you add children as dependents or as your income rises. Note that term insurance typically expires after a stated period of time or once you reach a specific age, so the benefit is paid only if you die during the stated term.

Permanent life insurance

You can choose from a variety of permanent life insurance policies, which could include traditional whole life, variable life, universal life or variable universal life. Like term policies, they pay designated beneficiaries at your death. An important difference from term life is that they don’t have a termination date. As long as adequate premiums are paid and the policy remains in force, beneficiaries will receive the death benefit. Note that there are often higher or additional costs for permanent life insurance compared to term insurance policies.

Another important difference is that cash value is built up inside the policy as you add premium payments. Premium payments must be sufficient to avoid a policy lapse, but a portion of those payments accrue within the policy and can grow on a tax-free basis. Some forms of this type of insurance give you the ability to make investment choices within the policy as a way to potentially increase its cash value. The cash value is not guaranteed, but it can act as an asset to help fund needs while you are living. This is an important benefit that can give the policy owner much more financial flexibility.

Like anything else in your financial life, the need to protect loved ones requires that you assess what options work best for your circumstances and needs. Be sure to discuss your options with a financial advisor or insurance specialist before making any decisions.

David is an Accredited Investment Fiduciary® (AIF) and an Accredited Asset Management Specialist (AAMS®) who advises professionals, retirees, families, and other clients on personal financial strategies. His focus is on financial planning and asset management. David has more than 28 years of investment and wealth management experience, and is the author of two books “A Financial Prescription for Doctors and Dentists: Strategies for Achieving Your Personal and Career Goals” (2015) and “Beyond Performance: How Financial Advisors Deliver Added Value to Their Clients” (2018)

Raymond James & Associates, Inc., member New York Stock Exchange/SIP

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Variable life insurance products are sold by prospectus, which describes risk factors, fees and charges that may apply. Cost of insurance charges varies based on the circumstances of the insured life. Surrender charges vary by issue age, risk class and gender. The prospectus should be read carefully before applying for coverage.