Life Insurance

There are two major types of life insurance – term and permanent. When you think of term life insurance, equate it to “temporary” insurance, because it only provides coverage for a specified numbers of years i.e., term. Permanent life insurance is just that – “permanent” – in that it covers the span of your entire life. Permanent life insurance encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, approximately 6.4 million individual life insurance policies purchased were term and about 7.1 million were permanent.

Life insurance products for groups (employer sponsored) are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals. If you are interested in group life insurance, speak with one of our experienced professionals today.

Term Life

Term Life Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from 10 to 30 years. Most term policies have no other benefit provisions. So, if you seek life insurance for a limited time – long enough to meet your anticipated responsibilities to those who depend on you, but not longer – Term Life Insurance may be right for you.

Term Life Basics

• Provides coverage only for a specified period (typically 10 – 30 years)
• Affordable way to obtain maximum death benefits
• Becomes considerably more expensive after the specified term period
• You build no equity – i.e., no cash value accumulation

Permanent Life

Permanent Life Insurance pays a death benefit whenever you die – if you are still leaving beyond a certain age (age 120 with most insurance companies) then the policy pays you the death benefit. There are three major types of permanent life insurance – whole life, universal life, and variable universal life, and there are variations within each type. So, if you value added security, flexibility, cash value and lifetime coverage, some form of Permanent Life Insurance may be the option of choice.

Permanent Life Basics

• Protection for your whole life, as long as the premiums are paid
• Can build equity in the form of a separate cash value account
• Offers flexibility and many options to choose from
• Initially higher premiums than Term, but generally more cost-effective in the long run

Whole Life

This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you select this type of life insurance policy, you are agreeing to pay a certain amount in premium on a regular basis, a portion of which covers the cost of the specified death benefit. The remaining portion of the premium paid is allocated toward the savings element (cash value account) that grows at either a guaranteed or non-guaranteed interest rate, depending on the option you select.

Universal Life

This type of policy offers greater flexibility than whole life insurance, such as the option to increase the death benefit, if you pass a medical examination. The savings component to this policy type (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you also have the option of altering your premium payments – providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you need to keep in mind that if you stop or reduce your premium payment and the saving accumulation is exhausted, the policy might lapse and your life insurance coverage will end.

Variable Life

This policy type combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also assume more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.

Variable Universal Life

If you purchase this type of policy, you get the features of variable and universal life policies all-in-one. You have the investment risks and rewards characteristics of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.

Blending Term and Permanent Life Insurance Together

In case you’re wondering, you're not limited to one or the other; you may find that a combination of Term and Permanent Life insurance meets your needs best. For instance, the foundation of your life insurance plan can be Permanent Life, supplemented by Term Life during your family-building, mortgage-paying years when financial risk exposures are typically higher.

Why You Need Protection

Life insurance is an act of love and kindness that you perform. Life insurance offers many unique benefits that when structured properly, can provide considerable financial leverage to your family that is received both income tax and estate tax free¹. In the event of your passing, life insurance provides money directly to your beneficiaries. They can use the money for whatever they want, such as:

• Make up for your lost income, so current lifestyle can be maintained
• Fund your child's or grandchild’s education
• Pay off mortgage and consumer debt
• Create a source of tax-free funds to provide a comfortable retirement
• Fund estate taxes to prevent liquidation of your estate due to estate tax obligations
• Pay for your funeral and other related final expenses

With life insurance, you can fulfill your promises to yourself, your family, your charity and your business.

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