Types of Life Insurance

Types of Life Insurance

All life insurance policies fall into one of two general categories:

  • Term Life Insurance
    Temporary – provides protection for a set period of time
    If coverage is needed after the initial term period, full medical and financial underwriting is generally required
    Many policies offer a “conversion privilege” for a limited number of years, allowing the policy to be exchanged for a permanent policy without underwriting
  • Cash value Life Insurance
    Can provide permanent protection
    Reserves future cost of insurance charges based upon your current health status
    Includes an internal savings component

Variations of Cash Value Life Insurance:

  • Whole Life (WL)

A whole life insurance policy’s face amount will be paid at the death of the insured, no matter when the death occurs, as long as the policy is in force.

The policy owner must pay the scheduled premiums on time and meet the requirements of the policy to keep the policy in force.

  • Universal Life (UL)

UL policies offer more flexibility and transparency relative to whole life policies.

The policy owner has the ability to modify the amount and duration of premium payments, within certain limits, and still maintain coverage for life as long as the cash value reserve is positive.

  • Indexed Universal Life (IUL)

UL platform variation, but with an interest crediting rate determined by reference to an equity index, typically subject to a maximum rate cap and a minimum rate floor.

  • Variable Universal Life (VUL)

UL platform variation, but with policy owner investment flexibility and risk/return opportunity.

VUL products permit the policy owner to allocate a portion of each premium payment into one or more “separate account” funds.

Separate accounts, which are similar to mutual funds, are not subject to the restrictions of the carrier’s general account portfolio, reducing the policy owner’s exposure in the event of carrier insolvency.

  • No-Lapse Guarantee (NLG)

UL platform variation, with a guarantee that if a specified minimum premium is paid regularly, the policy will not lapse for a specified period, or for life, even if the cash value decreases to zero.

NLG policies typically offer reduced cash value in comparison to other policy types.

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