Types of Life Insurance
Generally, owning life insurance guarantees that, in the event of the insured's death, a benefit will be paid to the insured's beneficiaries. In addition, permanent life insurance provides a cash value component from which cash can be accessed for various financial needs such as college tuition, a down payment on a home, business opportunities, and more.
Term Life Insurance
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Term life insurance typically has the lowest initial out-of-pocket cost of all life insurance policies. It does not provide permanent coverage, but instead provides a death benefit for a specified period of time (the "term") depending on the term policy selected.
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Whole Life Insurance
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Whole life insurance is designed for permanent coverage on the life of the insured. With a whole life insurance policy, the premium is guaranteed to never increase and the death benefit is guaranteed for life. It also has a cash value component that builds guaranteed cash value that can be accessed for various needs. Whole life insurance may pay dividends to policyholders. Dividends can be used to purchase additional coverage, reduce the premium, pay back loans or may be received in cash.
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Universal Life Insurance
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Universal life insurance can provide coverage for the life of the insured with the cost of the insurance being deducted from the policy's cash value. Universal life comes in two forms: Current Assumption UL and Death Benefit Guarantee UL. The Current Assumption UL bases policy performance on the interest rates available in the financial markets and premiums may fluctuate based on the interest rate assumptions in the policy.
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Variable Life Insurance
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Variable Life Insurance is similar to the Current Assumption UL policy; however, the policy performance is based on the underlying portfolios of securities in a separate account based on the policyholders' selection. The cash value is not guaranteed and fluctuates based on market performance of the portfolio selected.
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