When a customer purchases life insurance, they are creating a contract with the life insurance provider that a sum of money will be provided to the customer’s beneficiaries if they die. This payment is called the death benefit. There are different types of life insurance that meet a variety of needs, so let’s review them.
Term Life
Term life insurance provides protection for beneficiaries for a fixed period of time. Many policies are underwritten for periods of 10 to 20 years. After that time, the life insurance company has no further responsibility to provide a death benefit. Many companies will offer a continuation policy option beyond the initial term, but customers should be aware that policy premiums will be much higher after the initial policy is completed. Term life insurance is a good substitute for younger people who wish to have insurance to replace their lost income in the event they die before the term ends. This can be an effective tool to protect families because the policy premiums can be lower than other types of insurance.
Universal Life
Universal life insurance offers coverage for your entire life, but premiums will be higher than a term life insurance policy. The advantage of universal life policies is their flexibility; you can typically raise and lower your premium payments or amount of coverage to suit your economic situation at any given time. Universal life policies provide death benefit coverage beyond your income-producing years, but at a higher cost. Some universal life coverages focus on building cash value in your policy, while some focus on a guaranteed death benefit amount. Discuss your needs with us when determining the best policy to meet your short and long-term needs.
Whole Life
Whole life insurance provides lifetime coverage. Premiums are higher than term policies, but are normally fixed for your lifetime. Whole life insurance builds cash value over time, and can be a good choice if you are looking to eventually transfer part of your wealth to your beneficiaries. Consider it part of your estate planning when considering life insurance choices.
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