Different Types of Term and Permanent Life Insurance

TYPES OF TERM LIFE INSURANCE

It should come as no surprise to you that “term” life insurance involves “time,” that it pays a death benefit to your heirs only if you (the insured) die during a specified period.

Here Are Five Different Types of Term Life Insurance:

Level Term: Simply stated, Level Term provides you with a fixed amount of coverage (the amount of money the policy is worth to your heirs) with premiums (your cost of owning the life insurance) that are also fixed over a defined period – usually in ten-year increments up to thirty (30) years.
Decreasing Term: With this type of life insurance, your coverage decreases throughout the term; however, your premiums remain level (the same).
Renewable Term: This type of life insurance could be very important to you, especially if you have health issues later in life, because with Renewable Term, you (the policy owner) have the right to “renew” the insurance coverage at the end of the specified term without having to “prove” or submit evidence of your “insurability.”
Convertible Term: With this type of life insurance you (the policy holder/owner) have the right to convert your term policy to a permanent policy (more on “permanent” insurance in just a moment).
Group Term: The key word is this type of insurance is “group,” and it refers to the type of life insurance an employer or professional organization, for example, offers to its employees or members. Since Group Term Life Insurance is intended to cover several to possibly hundreds of people, it usually results in each person paying a reduced premium; however, most Group Term policies are not portable which means that the coverage ends when you cease employment or membership in the group.

LEARN THE BASICS:
JOINT LIFE INSURANCE

Why most couples need more life insurance coverage
The importance of protecting the surviving spouse
How joint life insurance works and the benefits it provides
Why this policy works for most married couples at any stage of their lives

TYPES OF PERMANENT LIFE INSURANCE

Permanent Life Insurance provides you with coverage throughout your entire lifetime, and it may include a way for you to build “cash value" in your policy.

Here are three general terms you should get to know:

Traditional Whole Life Insurance remains in force during the insured’s entire lifetime, provided that someone (the insured person or someone he or she chooses) pays the premiums as specified in the policy. Whole Life may also include a way for you (the policy owner) to accumulate growth (also called “building cash value). Furthermore, with participating in a Whole Life Insurance policy, you can also earn a dividend (“extra money” paid to you by the company according to the policy’s terms).
Universal Life Insurance can best be understood in terms of its flexible premiums, its flexible face amounts, and its unbundled pricing factors. Again, ask your insurance professional for more specific details on these three characteristics of Universal Life Insurance. Furthermore, it’s important to know that though Universal Life offers tremendous flexibility, it also lacks the guarantee that Whole Life Insurance provides. One other important feature: No Lapse Guarantee Universal Life has the same features as Universal Life but also has a guarantee that, as long as the premiums are paid on time, the policy will never lapse.
Variable Life Insurance is a form of insurance under which the death benefit and the cash value of the policy fluctuate (change) according to the investment performance of separate account investment options.

Now, let’s take a look at the four other types of Permanent Life Insurance:

Indexed Universal Life Insurance: This type of insurance is a form of Permanent Life Insurance that combines the premium and death benefit flexibility of Universal Life Insurance under which the policy’s cash value’s current crediting rate is based in part on the performance of a “financial index” – a specific kind of financial table that fluctuates up and down over the years. Most Indexed Universal Life Insurance policies, however, offer guarantees that if the index is negative (goes down), the “crediting rate” will NOT go below zero. Again, your insurance professional can fill in the important details for you about this type of insurance.
Variable Universal Life Insurance: This type of permanent insurance combines the premium and death benefit flexibility of Universal Life Insurance with the “investment flexibility and risk” of Variable Life Insurance and what is called Universal Life.
Last Survivor Universal Life Insurance: Also known as “survivorship” or “second-to-die” life insurance, this type of permanent life insurance covers two (2) people (e.g., a husband and wife) and provides for the payment of the death benefit proceeds only when both insured’s have died. The primary purpose of this type of insurance is to pay estate taxes.
Single Premium Life Insurance: With this type of insurance (often abbreviated as SPL), you may purchase Whole Life, Universal Life, or Index Life insurance with a single, lump-sum premium.