Life Insurance


There are two major types of life insurance—term and whole life. Whole life is often referred to
as permanent life insurance, and has several subcategories, including traditional whole life,
universal life, variable life and variable universal life.
Term Insurance

Term Insurance is the simplest form of life insurance. It pays only if death occurs during
the term of the policy, which could be 10,20, 30 years depending on what plan and
company you elect for coverage. Most term policies have no other benefit provisions,
while others do; currently some carriers offer the option for return of premium at the end
of the term, which is a fairly inexpensive add on to your policy . It’s almost like leasing
an apartment and at the end of the lease you move out and receive all premium
payment back.
There are two basic types of term life insurance policies: level term and decreasing
term.
● Level term means that the death benefit stays the same throughout the duration
of the policy.
● Decreasing term means that the death benefit drops, usually in one-year
increments, over the course of the policy’s term.

Whole life/permanent
Whole life or permanent insurance pays a death benefit whenever you die—even if you
live to 100! There are three major types of whole life or permanent life
insurance—traditional whole life, universal life, and variable universal life. In the case of
traditional whole life, both the death benefit and the premium are designed to stay the
same (level) throughout the life of the policy. The cost per $1,000 of benefit increases
as the insured person ages, and it obviously gets very high when the insured lives to 80
and beyond. The insurance company could charge a premium that increases each year,
but that would make it very hard for most people to afford life insurance at advanced
ages. So the company keeps the premium level by charging a premium that, in the early
years, is higher than what’s needed to pay claims, investing that money, and then using
it to supplement the level premium to help pay the cost of life insurance for older people.
By law, when these “overpayments” reach a certain amount, they must be available to
the policyholder as a cash value if he or she decides not to continue with the original
plan. The cash value is an alternative, not an additional, benefit under the policy.