Term life insurance covers you for a certain period of time,
a term of one or more years. Premiums are generally lower
for term insurance, allowing you to buy higher levels of coverage.
However, if you choose to renew your term insurance at the
end of the term or purchase a new term policy, premiums can
increase dramatically and you may need to have a new medical
exam to prove insurability again.
Permanent life insurance is designed to provide death benefit
protection for life. As long as you pay the premiums, the
death benefit will be paid. Permanent life insurance may have
fixed premiums, generally accumulates cash value on a tax-deferred
basis and may pay policy dividends. Although more expensive
initially than term life insurance, permanent life insurance
may, over time, become the least expensive form of life insurance.
There are four broad categories of permanent life insurance:
Variable Universal Life
Whole life insurance does exactly what its name says - it
provides life insurance protection for a lifetime. As long
as the required premiums are paid, whole life insurance products
guarantee to pay a death benefit.
Universal life provides permanent life insurance protection
that is flexible enough to change as your needs change.
Universal life coverage is like a savings account connected
to an insurance policy. Premium payments get deposited into
an interest earning account from which monthly deductions
are made for insurance charges and administration.
You may choose to make consistent payments on a regular basis
or less frequent larger lump sum payments. You have the flexibility
of paying what you want, when you want, as long as there is
enough money in the account to pay for the monthly insurance
and administrative charges.
In addition to the flexibility, universal life coverage offers
significant guarantees. In addition to offering a guaranteed
interest rate, universal life products offer "no-lapse"
guarantees. As long as premium requirements are met, your
policy is guaranteed not to lapse no matter what happens to
the account balance.
Variable universal life is permanent insurance that combines
death benefit protection with the opportunity to direct the
investment of net premium dollars into a broad portfolio of
investment options. Variable universal life can fulfill two
needs in one financial vehicle: life insurance protection
and account value accumulation.
Survivorship life insurance is a policy that offers life
insurance protection for two lives, flexible income settlement
options for you and your heirs, and estate preservation.
If you are married, your estate, within federal limits, will
pass to your spouse free of federal estate taxes when you
die. However, once your spouse dies, taxes can pose a serious
problem to your heirs. The second-to-die policy death benefit
proceeds can provide funds needed to pay estate taxes and
reduce or eliminate the need for your heirs to liquidate your