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In this video we’re going to look at the best type of life insurance. Now if you recall from our earlier videos, the different types of life insurance are built on different costs structures over different periods of time. And therefore, the best type of life insurance generally speaking is that which is cheapest over the period of time that you need it for.
So we want to define the period of time that you need it for, and what’s the cheapest for that time period.
If you want life insurance for income replacement or family needs and are assuming that you don’t need life insurance when you get older then the cheapest type of life insurance will be term life insurance. It’s the cheapest now and gets more expensive when you get older, but you’re going to cancel it.
Alternatively if you need life insurance no matter how old you are when you die, then the cheapest life insurance policy will be permanent life insurance.
Now, it doesn’t have to be either or. You can actually build what I call a layer cake policy which has a layer of permanent and a layer of term. So you’re going to lock in your premiums for the rest of your life for a certain amount of coverage and build it up with a much cheaper block of term life insurance which you’re going to cancel when you get older. That’s the best of both worlds if you say “I need a lot of insurance now and a little bit when I’m older.”