| 1. |
Term Life |
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Term life policies cover you only for a specific
period of time - usually for 5, 10, 15, 20 or 30 years - or until a specified age, such as 65. Most
term life policies provide a one-time payment (benefit) to the beneficiary for the amount of the
policy if the insured party dies during the coverage period. |
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Key Attributes |
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Premium Type - some policies charge more as
the insured person gets older (increasing premium), while others maintain the same price for the term
of the policy (level premium)
Renewable - A renewable policy allows the policyholder to continue the insurance for additional
terms regardless of your health and without having to pass a medical exam. For example, annually
renewable term provides fixed premiums and benefits for one year. At the end of the year, the
policyholder may renew the insurance, but the premium will probably increase.
Convertible - Most term insurance policies allow an exchange of the policy for a cash value
policy without a medical exam or answering health-related questions.
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| 2. |
Permanent Life Insurance (or Cash Value
Life) |
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a. Whole Life (or Ordinary
Lift) |
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Whole life is a type of permanent life insurance,
i.e. the policy and the premium payments are for the insured entire life. The premium is set at the
beginning of the policy. The premium may be level or increase after a fixed time period, but the
premium will not change from the amount shown in the policy schedule. Whole life (and other
permanent life insurance policies) accumulate a cash value. The cash value is paid out upon the
insured persons death, but can also be used as collateral for loans prior to death. |
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b. Universal Life |
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Universal life differs from whole life in its
flexibility. Within limits, you can choose the amount and timing of premium payments and the death
benefits. The policy stays in force as long as its value is enough to pay its expenses. |
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c. Variable Life |
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A variable life policy allows the owner to invest
the cash values in a selection of separate accounts similar to mutual funds. Separate accounts may
include money market funds and mutual funds invested in stocks and bonds. A variable life policy is a
higher risk to the owner than whole life or universal life because the cash value varies based on the
investment performance of the selected accounts. |
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Policy
Comparison
|
| |
| |
Term Life |
Whole
Life |
Universal
Life |
Variable
Life |
| Premiums |
Lower |
Higher on a set
schedule |
Flexible |
Higher on a set
schedule |
| |
| Duration |
Specified period |
Life |
Flexible |
Life |
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| Benefits |
Death only |
Death, cash value and
loan |
Flexible death, cash value and
loan |
Variable death, cash value and
loan based on fund performance |
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