Life Insurance

The policy could be a term policy, whole life (or a variation of whole life such as 20 year payment life, or life paid up at 65), endowment, universal life, or some other type. The type of policy will determine many other aspects of the policy, such as whether it has cash or loan values, the length of time you are scheduled to pay premiums, etc.

Term Insurance

Term life insurance allows the insured to select coverage for a specified number years in exchange for a level premium for each of those years. These terms are commonly 5, 10, 15, 20, 25 and even 30 years. The policy pays a death benefit in the event the insured dies during the specified period. Since term insurance is for a limited period and accumulates no cash value, the rates tend to be the most affordable.

Similar to other types of insurance, like auto and home, Term is generally considered “pure” insurance, where the premium buys protection in the event of death and nothing else.

Permanent Life Insurance

Permanent life insurance is a form of life insurance where the policy is guaranteed for the life of the insured (assuming the policy is kept current and the premiums are paid). The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.

Whole life insurance offers a level premium and a guarantee by the insurance company that the policy will earn cash value. Often referred to as permanent insurance, the death benefit guarantee for a whole life policy can be anywhere from age 100 to age 121. Once a policy has been issued both the death benefit and premiums remain the same and typically cannot be changed or altered.

Universal life insurance is another type insurance product intended to provide permanent insurance coverage only with greater flexibility. A universal life insurance policy also earns cash value and since the both the premium and death benefit are flexible the amount you pay can increase the cash values