Life Insurance comes in two primary forms:
Term Life Insurance
Term life insurance is the least expensive form of life insurance, with varying costs depending on age, gender, and health classification. Term coverage can span from 1 to 30 years, and the premium structure can change or remain level for the period selected.
If the insured dies within the term period and the policy is in force, the death benefit paid is tax-free. If the insured dies after the term period, no benefit is paid.
Term agreements sometimes contain conversion privileges that allow the policy to transition into a permanent life insurance policy without the need for additional medical underwriting.
Permanent Life Insurance
Unlike term life insurance, permanent life insurance doesn’t expire after a certain point as long as you continue making your premium payments. This type of insurance comes in various forms, explained below:
Whole Life Insurance. With whole life, there is a guaranteed death benefit regardless of when the insured passes. Whole life also has a savings component (known as the “cash value”) that can grow and serve as a source of equity for you. You can withdraw or borrow money from the account as needed.
Universal Life Insurance. The difference between universal life insurance and whole life insurance is the flexibility to adjust the premium and death benefits based on your budget and needs. Like whole life, universal life insurance offers a savings element and a death benefit, but it features different premium structures and earns based on market performance.
Variable Universal Life Insurance. Variable universal life policies are considered securities contracts because there is investment risk. These policies are also tied to market performance.
Indexed Universal Life Insurance the most advanced type of permanent life insurance policy, these contracts allow the insured to determine how much cash value to assign to either a fixed account or an equity-indexed account. The language in these policies extends beyond Life Insurance 101 and should be discussed in detail with one of our advisors.