By Brent Matthew
Most people don’t want to think about dying. So, naturally, they aren’t inclined to think about life insurance. However, the sooner you get coverage, the sooner you’ll discover the peace that comes with knowing your family is taken care of. But how do you choose from the many available types of life insurance?
The type of insurance that suits you best depends on your family’s individual needs and goals, but here’s a general look at some of the types of life insurance you may want to consider.
Understanding the Two Main Types of Life Insurance
The way traditional life insurance works is fairly simple. You take out a policy and pay your premiums, and when you die, your beneficiaries (usually your family members) receive a death benefit.
For most of my clients, a life insurance policy is part of a comprehensive estate plan. The death benefit can have a number of uses:
- Replacing the income you earned to support your family
- Covering your burial and funeral expenses
- Paying for your children’s education
- Providing a financial cushion for your family as they adjust to the loss
If you want to take out a traditional life insurance policy, you can generally choose from one of two types of life insurance: term or whole life insurance.
Term Life Insurance
With a term life insurance policy, your policy lasts for a set amount of time (or a specific “term”). Most policies last 10, 20, or 30 years. If you die during that time, your family receives a death benefit. If you’re still alive by the end of the term, your insurance company may give you a chance to convert your policy to one of a few types of life insurance.
Term life insurance policies are great for younger adults who are supporting children or paying off a mortgage. By selecting a policy that lasts until the children are grown, the mortgage is paid off, or both, you can help your family avoid significant financial stress.
Whole Life Insurance
Whole life insurance, also called permanent life insurance, is an insurance policy that lasts your entire life. The policy pays a death benefit upon your death, but your premiums are invested in an account that generates tax-free interest. You may also be able to borrow against the cash value of your policy.
In many cases, it makes more sense to take out a whole life insurance policy after taking out a term life insurance policy as a younger adult. Whole life insurance policies have many benefits, but they tend to be much more expensive than term life insurance.
Going Beyond Traditional Life Insurance
Many people don’t realize that term and whole life insurance aren’t the only types of life insurance available. Cash value accumulation test (CVAT) life insurance policies are what I like to call “life insurance for the living.” These policies represent a multi-faceted approach to financial planning that goes far beyond traditional death benefit protection.
CVAT policies often offer insurance against more than just death. In many cases, you can access up to 25% of your death benefit (or up to $500,000) if you suffer a serious illness like cancer.
Your CVAT life insurance policy can also potentially be a source of tax-free income, and you can access that income as soon as three years into your policy. When you pass away, it provides a tax-free death benefit.
Taking out a CVAT life insurance policy may not be right for everyone. However, if it’s the right choice for you, you’ll be building an asset and covering your family with one policy.
Considering Life Insurance?
The key to choosing the right life insurance approach is understanding what you want your policy to accomplish. Do you want growth potential? Liquidity for emergencies? Income replacement? Protection against major illness? By identifying your priorities, you can structure a policy that serves multiple financial objectives while providing the peace of mind that comes with proper life insurance coverage.
At Scottsdale Wealth Advisory, I help retirees and pre-retirees build happy, rewarding lives—and that includes helping them consider the different types of life insurance and choose one that suits their needs.
If you are looking to purchase life insurance for the first time or you want to learn more about different types of life insurance, contact us today.
To schedule your complimentary financial coaching session, call (480) 247-9090, email info@SWAFirm.com, or book directly at calendly.com/BrentMatthew.
Frequently Asked Questions About Life Insurance
How much life insurance do I actually need as a young married couple?
The amount depends on your specific financial obligations and goals. At minimum, consider coverage that would pay off your mortgage, replace 5-10 years of the deceased spouse’s income, and cover major expenses like children’s education. A common rule of thumb is 10-12 times your annual income; however, mortgage protection may require additional coverage. For example, if you have a $300,000 mortgage and earn $75,000 annually, you might need $1 million or more in coverage to adequately protect your family’s lifestyle and keep them in their home.
What’s the difference between term life insurance and permanent life insurance with cash value?
A: Term life insurance provides pure death benefit protection for a specific period (usually 10-30 years) at lower premiums, making it ideal for mortgage protection and income replacement during child-rearing years. Permanent life insurance with cash value (like CVAT policies) costs more but builds tax-deferred cash value you can access during your lifetime, provides lifelong coverage, and offers additional benefits like chronic illness riders. Think of term as renting protection and permanent as buying an asset that also happens to provide life insurance.
Can I really access my life insurance death benefit while I’m still alive?
Yes, with modern permanent life insurance policies that include living benefits riders. Many CVAT policies allow you to access up to 25% of your death benefit (typically capped at $500,000) if you’re diagnosed with a qualifying chronic illness requiring assistance with daily activities, or a terminal illness. Additionally, the cash value component can provide tax-free loans for any purpose, including retirement income, emergencies, or opportunities. This makes permanent life insurance truly “insurance for the living” rather than just a death benefit.
About Brent
Brent Matthew is the founder and CEO of Scottsdale Wealth Advisory, a full-service fiduciary retirement planning firm serving pre-retirees and retirees across Arizona and multiple states. With a strong commitment to always putting clients first, Brent leads the firm in developing comprehensive, tax-efficient financial plans tailored to each family’s unique goals. He is responsible for researching investment, annuity, and life insurance strategies and building smart asset allocations that reflect both long-term growth and risk management.
Brent is driven by a core belief: “The success of this firm will be measured by the success of the families it represents.” That client-first approach has guided his work since the beginning. He is currently enrolled at the College for Financial Planning and is on track to earn his CERTIFIED FINANCIAL PLANNER® designation. He also holds his Series 65 license and Arizona Life and Health Insurance Producers License.
Outside the office, Brent embraces the Arizona outdoors with “lil B” and their two pomskies, Heimo and Kota. Whether he’s hiking, fishing, dirt biking, skiing, golfing, kayaking, or skeet shooting, Brent finds balance and joy in staying active. He’s also a fan of CrossFit, brunching, and cruising the Phoenix canal system on his beach cruiser—usually with classic tunes from the Marshall Tucker Band, Gordon Lightfoot, or Crosby, Stills & Nash playing in the background. To learn more about Brent, connect with him on LinkedIn.
Advisory services are offered by Scottsdale Wealth Advisory, LLC, an Investment Advisor in the State of Arizona. Insurance products and services are offered through Scottsdale Wealth Advisory, LLC. Scottsdale Wealth Advisory, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency, and is not engaged in the practice of law. Be sure to consult with a licensed financial professional to confirm the accuracy of the insurance product you are considering.
