Life Insurance

The basic choice in life insurance is between term life and a more permanent solution, such as universal life.

Term Life Insurance

Term life insurance is often the most inexpensive way to purchase a substantial death benefit. However, if you’re planning to keep the coverage in place for the long range, permanent insurance should be considered. It is more costly in the beginning, but less costly over a long period.

Important Things to Know about Term Insurance:

  • The coverage is for a specified time. When the term ends, you can either drop the policy or pay additional premiums to continue the coverage.
  • In case of death during the term, the death benefit will be paid tax-free to the beneficiary.
  • Term life insurance builds no cash value, unlike permanent life insurance products such as whole life or universal life, and does not offer a return of premium dollars if no claims are filed.
  •  Most carriers offer additional riders that increase your protection against risk, and many offer an opportunity to convert to permanent insurance without further underwriting within a specified period,
  • There are some circumstances where a term policy may be issued without a medical exam. In that case, there are generally detailed questions about health, finances, and hobbies.
  • Though annual renewable term insurance is available, the much more popular product is guaranteed level premium term life insurance, where the premium is guaranteed to be the same for a given period of years, such as 10, 15, 20, or 30 years. 
  • With this type of product, the premium is the same each year, and longer terms have higher premiums because individuals are more expensive to insure as they get older.
  • Most carriers include a renewal option and allow you to renew for a maximum guaranteed rate if the insured period needs to be extended.

Universal Life Insurance

Universal life insurance is a type of permanent life insurance based on a cash value.

Important Things to Know About Universal Life Insurance:

  • It generally features a lifetime guaranteed minimum death benefit, a tax-free death benefit, transfer of benefit to beneficiaries, and a guaranteed cash surrender value.
  • The policy can help with income replacement. supplemental income, or estate planning.
  • Premium payments above the cost of insurance are credited to the cash value, which is credited each month with interest, and the policy is debited each month by a cost of insurance charge.
  • When sufficient cash value has accumulated, premium payments can be drawn from the cash value, or loans may be taken.
  • The interest credited to the account is determined by the insurer; sometimes it is pegged to a financial index such as a bond or other interest rate index.

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