What Makes a Life Insurance Policy Good? How to Choose the Right One

“I want good life insurance. But what does that actually mean?”

That sounds like a simple question. It isn’t quite so easy and why many people end up very disappointed.

There are hundreds of life insurance policies available, and they aren’t all designed to do the same thing. One policy may be built primarily around providing a large death benefit at an affordable price. Another may provide permanent coverage with guarantees and cash value. Another may include living benefits that can provide access to money if you experience certain serious health conditions while you’re still alive. A few may even offer dividends for being a policyowner.

So which one is the “good” policy?

The answer depends on you and what you’ve set out to do.

Good life insurance isn’t necessarily the cheapest policy, the most expensive policy, the simplest policy, or the one with the most features. Good life insurance is coverage that accomplishes what you need it to accomplish, at a cost you can reasonably maintain, with features and guarantees that make sense for your situation.

That’s what we’re going to look at here.

Rather than telling you that one particular type of life insurance or a particular insurance company is always better than all the others, we’ll walk through the decisions you should make before choosing a policy.

By the end, you should have a much better idea of what you’re looking for—and you’ll be in a better position to have a productive conversation with a life insurance professional if you want help putting it all together.

Start With What You’re Trying to Accomplish

Before you worry about which insurance company to choose, start with the reason you’re buying life insurance.

What problem are you trying to solve?

Maybe you want to replace your income so your spouse and children could maintain their lifestyle if you died.

Maybe you want to make sure your mortgage is paid off.

Maybe you’re primarily concerned about providing money for your children or other dependents.

Maybe you want enough coverage to take care of funeral and final expenses.

Maybe you have a lifelong need for coverage and want to leave money to your family or provide a legacy.

Maybe you’re protecting a business, a business loan, or a financial obligation that would create problems for your family or business partners if you died.

These are very different objectives.

And that’s why the first question shouldn’t be:

“Which life insurance company is the best?”

It should be:

“What do I want this life insurance policy to accomplish?”

You can’t determine whether a life insurance policy is good until you know what job you expect it to perform.

Determine How Much Life Insurance You Need

Once you understand what you’re trying to accomplish, the next question is how much coverage it will take to accomplish that goal.

This is where people sometimes make the mistake of starting with their budget alone.

It’s certainly important to buy coverage you can afford comfortably. But the question isn’t simply, “How much insurance can I buy?”

It’s also:

“How much insurance do I actually need?”

If you’re trying to replace income for a family, protect a mortgage, provide money for children, or cover a substantial financial obligation, the amount required may be considerably different from someone who simply wants to cover final expenses.

The right amount of insurance is the amount that reasonably accomplishes the purpose you’re buying it for while remaining affordable enough that you can keep the policy in force.

There’s no magic number that works for everyone.

Decide How Long You Need the Coverage

The next question is how long you need the protection.

Some financial needs have an expiration date.

Your children may eventually become financially independent. Your mortgage may eventually be paid off. A business loan may eventually be retired. Your need to replace employment income may change as you approach retirement.

Those types of needs can make temporary coverage attractive.

Other needs don’t necessarily go away.

You may want permanent money available for final expenses. You may have a lifelong dependent. You may want to leave a legacy. You may have estate, business, or family-planning objectives that require coverage to remain in force for your lifetime.

Sometimes the answer isn’t either/or.

A person may have a temporary need for a large amount of coverage and a permanent need for a smaller amount. In that situation, a combination of policies may make more sense than trying to make one policy do everything.

Choose the Type of Life Insurance That Fits the Job

Once you know what you’re trying to accomplish, how much coverage you need, and how long you need it, you can start looking at the different types of life insurance.

Term Life Insurance

Term life insurance is designed to provide coverage for a specific period of time. It is temporary insurance.

It’s often a very effective way to provide a large death benefit at a relatively affordable premium during the rate guarantee period. That’s why term insurance can make a great deal of sense for income replacement, young families, mortgage protection, and other financial obligations that are primarily temporary.

If the problem you’re solving has an expiration date, term insurance can be excellent insurance.

The tradeoff is that term insurance is harder to qualify for, has no cash value, and the coverage is tied to the term period unless you renew or convert the policy according to its provisions.

For someone who primarily wants a substantial death benefit and doesn’t need lifetime features, that straightforward approach can be exactly what they’re looking for.

Whole Life Insurance

Whole life insurance is permanent insurance designed to remain in force for life, assuming the policy requirements are met.

It can provide guaranteed death benefits, guaranteed cash value growth, and predictable premiums. Some whole life policies are also participating policies, meaning they may be eligible for dividends from the insurance company, although dividends are not guaranteed.

Whole life can make sense when the need for insurance is permanent and the policyholder values guarantees and cash value.

But permanent coverage generally costs more than term insurance for the same initial death benefit.

That’s not necessarily a bad thing.

You’re buying something different.

The question is whether the additional cost is buying something you actually want and need.

Guaranteed Universal Life

Guaranteed universal life, often called GUL, is another form of permanent life insurance.

No, this is not guaranteed issue life insurance which is a subtype of whole life insurance.

GUL is frequently designed with the emphasis on providing a guaranteed death benefit for life rather than maximizing cash-value accumulation.

For someone who wants permanent coverage but isn’t particularly interested in building cash value, this can be an attractive type of policy to investigate.

Sometimes the goal isn’t to build a large cash-value account.

Sometimes the goal is simply:

“I want to know that this death benefit will be there when my family needs it.”

Universal Life and Indexed Universal Life

Universal life policies can provide more flexibility in policy design and may offer cash-value accumulation and other features.

Indexed universal life, or IUL, is a form of universal life that generally provides cash-value growth potential tied in part to the performance of an external market index, subject to the policy’s specific terms, caps, participation rates, charges, and other provisions.

These policies can be useful in the right circumstances, but they’re also more complicated than a straightforward term policy.

More features don’t automatically make a policy better.

They make it more important to understand what you’re buying and why.

Final Expense Insurance

Final expense insurance is generally designed for a smaller permanent death benefit intended primarily to help with funeral costs and other final expenses.

It can be particularly useful for older applicants or people whose health makes traditional life insurance more difficult or expensive to obtain.

It is typically has no medical exam.

The tradeoff is that the cost per dollar of coverage can be considerably higher due to the “no-exam” application for lifetime coverage and the leniency of the medical requirements.

Again, that’s not necessarily a flaw.

The policy is solving a different problem for people who just need a small policy (up to $50,000) that will ensure the financial needs of their loved ones will be taken care of when they inevitably pass away.

A Good Policy Is About More Than the Type of Insurance

This is where the decision becomes more interesting.

Two people can both buy term life insurance and have very different ideas about what makes a good term policy.

One person may say:

“I just want the most death benefit I can reasonably get for my budget.”

Another may say:

“I’m willing to pay a little more if the policy gives me additional benefits I could use while I’m alive.”

Both can be perfectly reasonable.

Do You Want a Chevrolet or a Mercedes?

Think about life insurance like buying a vehicle.

Some people want a Chevrolet.

They want something dependable that does the job without paying for a lot of extras.

In life insurance, that might mean a straightforward term policy focused primarily on the death benefit. If you die while the policy is in force, your beneficiaries receive the death benefit. That’s the job.

Other people want a Mercedes.

They’re willing to spend more because they value additional features.

That doesn’t necessarily mean they’re buying whole life.

You can have a more feature-rich term policy, too.

Some term policies include living-benefit provisions that may allow you to access a portion of the policy’s death benefit if you experience certain qualifying illnesses or health conditions. You’re paying somewhat more for those additional provisions, but some people place significant value on having that protection available.

So the “Mercedes” can be a term policy.

It can also be a whole life policy with additional guarantees, dividend potential, cash-value features, or other policy provisions.

The point of the analogy isn’t that one vehicle is better.

It’s that different people want different things from the vehicle they’re buying.

The same is true with life insurance.

Do Living Benefits Matter to You?

Some life insurance policies are designed primarily to pay a death benefit when you die.

Others can provide additional ways for the policy to provide value while you’re still living.

Depending on the policy, living-benefit provisions may allow you to access some of the death benefit if you experience a qualifying terminal, chronic, or critical illness or another specified health event.

For example, imagine you suffer a serious health event and are unable to work. If your policy contains an appropriate living-benefit provision and you meet its requirements, you may be able to access money from the policy while you’re alive rather than waiting for the death benefit to be paid after your death.

The exact definitions, triggers, amounts, and costs vary by policy, so this is something you need to understand before buying.

But here’s the important question:

Would having those additional protections be valuable to you?

If the answer is yes, you may be willing to pay somewhat more for a policy that includes them.

If the answer is no, you may prefer to spend your money primarily on the death benefit itself.

Neither answer is wrong.

Cash Value Is Another Kind of Living Benefit

Cash value is another way certain permanent life insurance policies can provide value while you’re alive.

With a permanent policy that accumulates cash value, you may have the ability to access that value during your lifetime, including through policy loans, subject to the policy’s terms and the potential consequences of doing so.

You don’t have to experience a health crisis.

You don’t have to become disabled.

You don’t have to die.

The cash value is simply another feature of the policy that can potentially be used during your lifetime.

That’s one of the fundamental differences between cash-value permanent insurance and a typical term policy.

Again, however, the existence of a feature doesn’t automatically make a policy better.

You should understand why you’re paying for that feature and whether it serves a purpose in your overall financial plan.

Guarantees or Flexibility?

Some people place a high value on guarantees.

They want predictable premiums and want to know what the policy is designed to provide as long as they meet the policy requirements.

Other people value flexibility.

They may want the ability to adjust the policy, potentially change how premiums are allocated, or pursue cash-value growth.

Different policies are designed around different priorities.

More Features Don’t Automatically Mean Better Insurance

This is an important point because it’s easy to fall into the trap of thinking that more must be better.

It isn’t.

A policy with ten additional features that you’ll never use may not be a better choice for you than a straightforward policy that accomplishes exactly what you need.

At the same time, paying a little more for features you genuinely value can make perfect sense.

The least expensive policy isn’t necessarily the best policy, and the policy with the most features isn’t necessarily the best policy either.

The right policy is the one that fits the job.

Your Health, Occupation and Overall Risk Profile Matter

There’s another part of this equation that consumers sometimes don’t realize until they apply for coverage:

Your life insurance options are affected by your risk profile.

Your age matters.

So does your medical history.

Insurance companies may consider things such as medications, recent hospitalizations or surgeries, diabetes, heart disease, a previous heart attack, COPD, cancer history, sleep apnea, height and weight, tobacco use, driving history, occupation, hobbies, and other factors.

And here’s where life insurance can get complicated.

Different insurance companies don’t necessarily look at the same risk in exactly the same way.

Imagine someone in their 40s or 50s who had a heart attack a couple of years ago and also has diabetes.

That person may have difficulty obtaining the same type of affordable term insurance available to a healthy person of the same age. Depending on the details, one company may decline the application while another may offer coverage at a different rate, or a different type of policy may make more sense.

That doesn’t necessarily mean the person can’t get good life insurance.

It means that their definition of a good policy may need to change based on their actual risk profile.

This is one of the reasons life insurance isn’t simply a matter of finding the company with the lowest advertised price.

This Is Why the Insurance Company Shouldn’t Be Your First Decision

It’s natural to ask questions like:

“Is this company better than that company?”

That can be a good question to ask.

But they shouldn’t necessarily be your starting point.

Start with:

What am I trying to accomplish?

Then:

How much coverage do I need?

How long do I need it?

What type of policy makes sense?

Do I want additional features such as living benefits or cash value?

What can I realistically qualify for based on my health and overall risk profile?

Then—and only then—does it make sense to determine which insurance companies have products that fit what you’re looking for.

A good insurance company can’t turn the wrong policy into the right policy.

The right company matters.

But the policy design matters, too.

Why an Experienced Life Insurance Professional Can Make a Difference

This is where working with an experienced life insurance professional can be particularly valuable.

A knowledgeable agent isn’t simply looking for the company offering the lowest premium.

They’re looking at the entire picture.

What are you trying to accomplish?

How much coverage do you need?

How long do you need it?

What type of policy fits?

What features are important to you?

What does your health history look like?

What medications are you taking?

Does your occupation or a particular hobby create an underwriting issue?

Which insurance companies are likely to be a good fit for your circumstances?

And perhaps most importantly:

Are you applying for the right policy with the right company in the first place?

This matters even more when your situation isn’t straightforward.

Someone with significant health issues, a previous decline, multiple medications, a recent medical event, or a complicated financial objective may benefit from having someone who understands the underwriting nuances before an application is submitted.

The goal isn’t to sell everyone the same type of life insurance.

The goal is to understand the person, understand the need, understand the risk, and then determine what solutions make sense.

Beware of One-Size-Fits-All Life Insurance Advice

You’ve probably heard some version of this advice:

“Always buy term and invest the difference.”

“Whole life is a bad investment.”

“Never buy term.”

“Permanent insurance is always better.”

There’s usually some truth behind why these ideas became popular.

But none of them should automatically be treated as a universal rule.

Term insurance can be an excellent solution.

Whole life can be an excellent solution.

Guaranteed universal life can be an excellent solution.

Indexed universal life can be an excellent solution.

And each of those can also be the wrong solution for a particular person.

The question isn’t which philosophy wins an argument on the internet.

The question is:

What are you trying to accomplish, and which type of policy best accomplishes it?

Start with the objective.

Then evaluate the options.

Don’t Confuse a Good Insurance Company With a Good Life Insurance Policy

There are a lot of nuances to life insurance policies, and there can sometimes be a significant difference between what you applied for and what you’re ultimately offered.

It’s important to know something about the insurance company, too. You want to work with a financially sound company with a good reputation for its life insurance claim payments and for treating policyholders fairly. But a good insurance company doesn’t automatically mean that every life insurance policy it offers is right for you.

And the difference can come down to things you might not expect. One insurer may be comfortable with a particular health condition while another isn’t. The same can be true with your driving record. One extra speeding ticket may not matter to one carrier, while one accident or one extra ticket too many within a certain period could result in a much higher rate—or make you ineligible for that company’s coverage altogether.

Don’t make the mistake of working with limited options simply because you’re familiar with an insurance company’s name. You want enough options outside of that company to find a policy that actually fits your needs and goals if that company isn’t able to offer the right coverage for your situation.

There are many excellent insurance companies you may never have heard of, particularly companies that distribute much of their life insurance through independent agents and brokers rather than directly to consumers. The name may be unfamiliar, but the policy may be an excellent fit.

And once your policy is issued, read it. Make sure you understand what you bought, what it costs, what it guarantees, and what it actually provides. There can be important differences between the policy you expected to receive and the policy that was ultimately offered to you.

Know the company, but know the policy, too. Don’t get trapped by a company name or limited options. You’re not just buying an insurance company’s reputation—you’re buying a contract, and that contract needs to fit what you’re trying to accomplish.

So, What Does “Good Life Insurance” Actually Mean?

After everything we’ve covered, here’s a practical way to think about it.

Good life insurance should:

• Accomplish the purpose you bought it for.
• Provide an appropriate amount of death benefit.
• Last as long as you actually need the protection.
• Have premiums you can reasonably maintain.
• Fit your health and overall risk profile.
• Include features that are actually valuable to you.
• Come from an insurer appropriate for your situation.
• Be structured in a way you understand.
• Make sense as part of your overall financial picture.

It doesn’t have to be the cheapest.

It doesn’t have to be the most expensive.

It doesn’t have to have the most features.

And it doesn’t have to be the same type of policy your neighbor, brother, financial guru, or favorite internet personality bought.

Good life insurance is the policy that makes sense for you.

When You Should Consider Getting Professional Help

You don’t necessarily need an expert to tell you that you want life insurance.

But you may want some help figuring out which life insurance makes sense.

Professional guidance can be particularly valuable if:

• You have significant health conditions.
• You’ve been declined for life insurance before.
• You’re taking several medications.
• You’ve recently had surgery or been hospitalized.
• You’ve had a heart attack, cancer, or another significant medical event.
• You’re not sure how much coverage you need.
• You’re considering permanent life insurance.
• You’re interested in living benefits.
• You want cash-value life insurance but aren’t sure which type.
• Your occupation or hobbies may create underwriting concerns.
• You’re simply overwhelmed by all the choices.

Online life insurance can certainly be convenient, particularly for people who have a straightforward situation and prefer to handle the process themselves.

But if your circumstances are complicated—or you’re simply unsure where to begin—there’s value in having someone who knows the products and underwriting process help you sort through the choices before you apply.

Choosing the wrong policy—or applying with the wrong company—can leave you paying more than necessary or believing you have fewer options than you actually do.

Help Me Choose the Right Coverage

You don’t have to figure this out by yourself.

If you’d like our help, we can talk through what you’re trying to accomplish, look at your circumstances, and help you determine what types of life insurance may make sense before you apply.

There’s no requirement that you already know exactly what you want.

That’s part of what we’re here to help with.

If you’d like help choosing the right life insurance coverage, complete our Personal Life Insurance Quote form and we’ll start the conversation.

A Final Word From an Experienced Life Insurance Agent

I’ve been helping people with life insurance for more than 25 years, and one thing I’ve learned is that there really isn’t one life insurance policy that’s right for everyone.

The person who wants straightforward term insurance may be making an excellent decision.

The person who wants a permanent policy with guarantees and cash value may also be making an excellent decision.

And someone who wants additional living benefits may be perfectly willing to pay more for a policy that provides those additional protections.

The job isn’t to put everybody into the same policy.

It’s to understand what you’re trying to protect, understand your circumstances and risk, understand the products available, and then find the solution that makes the most sense.

Sometimes that’s the Chevrolet.

Sometimes it’s the Mercedes.

The important thing is that you’re driving the right vehicle for the road you’re on.

— Michael Flajole
Independent Life Insurance Agent
25+ Years of Experience

---