When you want to provide financial security to those who matter most to you, life insurance is a good place to start. It can protect your loved ones by providing a death benefit, so they have one less thing to worry about during difficult times. Life insurance is a contract between an insurance policy holder and an insurer where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person.
There are several different types of life insurance, which can fit a changing need that you may have throughout life. There are two main types of life insurance, Term and Permanent.
Term life insurance provides affordable temporary protection that can help your loved ones meet ongoing financial obligations such as debts, mortgages or costs related to raising children. Term Insurance is typically for a specific time period between 10 and 30 years. As long as your premium is paid your insurance will be guaranteed for the time period chosen. Term insurance does not build cash value.
Permanent Life Insurance is meant to last for your entire life. Permanent life insurance can be used for estate and legacy planning as well as supplemental retirement income. There are three main types of Permanent policies: Whole Life, Universal Life, and Variable Life.
Whole Life Insurance
Whole Life Insurance is meant to last your entire life. Your premium will never go up and the guaranteed coverage amount will not change. Many people choose whole life insurance because it can help them reach financial goals while they are living. A whole life policy accumulates cash value which is guaranteed to increase over time. You can borrow from your policy for many different reasons, including helping pay for college, supplement your retirement income, or provide cash for emergencies. Whole life insurance is also eligible to receive dividends. Dividends can be used to increase your life insurance protection and grow your cash value. It can also be used to reduce premiums if you so choose.
Universal Life Insurance
Universal life insurance is designed to provide permanent coverage to protect your family in the event of your death. Some universal life policies offer an option to guarantee the death benefit as long as specified premiums are paid, so you can feel the peace of mind of knowing you’re covered. If your financial circumstances change month-to-month, a universal life policy can provide the flexibility you need. You can decide how much premium to pay within certain limits, as long as there is enough account value to pay for the monthly insurance and administrative charges. Certain universal life policies can be used to accumulate cash value. The cash value would usually be based on an interest rate determined by the company.
Variable life insurance is a permanent policy that can also accumulate cash value. Unlike a whole life or universal life, a variable life policy determines its cash value from the performance of investment options. The performance of these options is not guaranteed. Similar to whole life, the cash value can be used to supplement retirement income or a child’s college fund. Variable Life will usually allow you to be flexible with the premium payments. In most cases you can decide when and how much that you want to pay.