Finding the Right Life Insurance Policy for You

Mother, father and two children relaxing on a couch. Sandy Spring Insurance.

Life insurance isn’t a fun thing to think about, and it may seem like an unnecessary expense. But if you have people who depend on you for financial support, then life insurance is really about protecting them in case something happens to you.

Life insurance can be confusing, so here’s a rundown of the basics:

Types of Life Insurance

Term: This is the simplest and generally the cheapest form. You buy coverage for a specific period of time. It can usually be renewed, but premiums will increase based on age and health factors. There is no cash value.

All other types of life insurance are permanent, but there are several varieties. They all include a savings element that builds cash value, in addition to the death benefit. The cash value may grow slowly, tax-deferred, meaning you may not pay taxes on its gains while they’re accumulating. You may be able to borrow money against the account or surrender the policy for the cash, foregoing some coverage. The following are some of the common types of permanent life insurance:

Whole Life: This policy covers your entire life, as long as you keep paying premiums. Premiums remain constant throughout the policy, and the insurance company invests a portion of your premium that becomes the cash value. These are more expensive than term policies in the early years, but they even out because the premium does not increase.

Universal Life: This policy is similar to whole life, but has the potential for higher earnings on the savings component. It is more flexible in terms of changing premiums and face value throughout the policy. There is usually a guaranteed return on the cash value. Disadvantages include higher fees and the possibility of increasing premiums.

Variable Life: A variable life policy generally has fixed premiums, and you have control over the investment decisions, typically mutual funds, for the cash value portion. However, this is riskier because there is no guarantee of the cash value. The cash value portion has the potential to grow as the underlying investments in the policy grow. However, the underlying investments may drop, so the policy may lose cash value.

How Much to Buy?
Most employers offer life insurance as part of their employee benefits package, but it’s hard to know how much to buy. Many people decide based on an income replacement calculation, between five and 10 times the amount of your current income.

Think about your personal circumstances:  Are you the sole income earner in your household? Are there other expenses, such as college tuition, that may arise in the future? Don’t forget to include potential medical and funeral costs. Above everything, you want to be sure your family does not get stuck with bills, debts or expenses that they cannot afford. Depending on your needs, you may want to consider buying supplementary coverage beyond what your employer offers.

Why Purchase Now?
Buying life insurance may seem unmanageable right now, but it could be a smart decision. Unlike many other benefits, life insurance is actually more affordable right now than in the recent past.  More importantly, life insurance can help ensure that your family will be financially secure in the future. 

If you have any questions about life insurance, please contact a Sandy Spring Insurance professional at 410.897.5800.


Wealth and Insurance products are not FDIC insured, not guaranteed, and may lose value.

Sandy Spring Insurance Corporation is a wholly owned subsidiary of Sandy Spring Bank.

This material is provided solely for educational purposes and is not intended to constitute tax, legal or accounting advice, or a recommendation for any particular transaction.