What is comprehensive life insurance?
Comprehensive life insurance is a type of permanent life insurance policy that combines death compensation and a savings car. With this type of policy, you are guaranteed coverage for the rest of your life as long as you pay your monthly premiums.
“You pay a monthly premium, and build up cash value that you can borrow or withdraw later,” says Leslie Taine. An attorney and founder of Tayne Law Group, a New York debt relief firm. Compared to whole life insurance, comprehensive life insurance offers greater flexibility because it offers adjustable premiums and adjustable death benefits. However, experts usually recommend life insurance over both comprehensive and comprehensive life insurance.
In general, experts caution against treating life insurance as an investment. “Life insurance is not meant to be an investment vehicle for living,” says Jeremy Schneider, founder of the Personal Finance Club. The concept of insurance is to protect yourself financially in the event something unexpected but costly bad happens or in this case, to protect loved ones.
How does comprehensive life insurance work?
Comprehensive life insurance consists of two components: death benefit coverage and a cash value accrual. When you pay your monthly premium, it is split between two parts of your policy, with a portion assigned to each. Similar to life insurance, comprehensive life insurance provides a death benefit to beneficiaries upon your death. Some comprehensive life insurance policies offer flexible death benefits, which means your insurance company may allow you to increase your death benefit — which in turn will increase your premiums — if you have another medical exam.
The death benefit component of life insurance is usually the most important part, as it gives your loved ones a financial safety net if you die and you can no longer support them. For this purpose, experts say that long-term life insurance is quite enough.
An additional advantage of comprehensive life insurance is that term life insurance does not represent a cash value that earns interest over time based on current money market rates. As the cash value increases, you can use it to pay your installments, borrow against it, or withdraw it entirely.
Comprehensive insurance vs comprehensive life insurance
Life insurance is a type of permanent life insurance policy that covers you for the rest of your life. Like comprehensive life insurance, this type of policy combines the death benefits associated with life insurance policies with an additional savings component.
Unlike comprehensive life insurance, life insurance policies have fixed monthly premiums, with a certain portion of the death benefit allocated and the rest toward the accumulated cash value. Life insurance policies often have more premiums than comprehensive life insurance, although both are much more expensive than life insurance.
Who qualifies for comprehensive life insurance
In general, you will likely be eligible for comprehensive life coverage unless extenuating circumstances cause your application to be denied.
Factors that may cause you to be rejected include:
- Poor physical health: Insurance companies may refuse to provide coverage for individuals with serious health conditions.
- Age: Most insurance companies only offer life insurance coverage for individuals under a certain age.
- Lifestyle: Insurance companies may be more likely to refuse coverage to individuals who have high-risk hobbies, a high-risk job, or unhealthy habits.
- Credit: Insurance companies may conduct credit checks before securing insurance policies. If you have poor credit or a bad financial history, you may have a hard time qualifying for some types of policies.
- Criminal record: Life insurance coverage may be denied if you have a criminal record. Especially if you have felonies on your record.
As with any life insurance, even if you qualify for coverage. Factors such as your health, age, and lifestyle may affect the price of your premiums.
How much does comprehensive life insurance cost?
The cost of a comprehensive life insurance policy depends largely on individual factors such as:
- Your age
- your health
- Your lifestyle and the risks it poses
- Your coverage amount
Because comprehensive life insurance includes a cash value component, these policies have much higher premiums than standard insurance policies. According to Lewis, the cost of a universal life policy will be several times the cost of a term policy.
