Life Insurance

Did you know that there are three primary types of life insurance? Term insurance, Universal Life, and Whole Life.

Term insurance – Term insurance is life insurance for a specific period.  You can think of it like when you lease a car.  You pay a monthly premium for the “term” of the coverage.  Typically, term coverage is for 10, 15, 20, or 30 years.  When the term of the coverage is up, your coverage is gone.  Just like when your car’s lease is up, you give it back.  But term coverage also allows you to continue to pay for coverage after the term at a much higher price if you want to keep it.  Again, like a car, at the end of the lease, you can buy the vehicle if you like, but you are not obligated to do so.

People typically buy term insurance if they want the cheapest option and only want coverage for a certain period.

Universal Life – This coverage falls under “permanent” coverage.  Universal life does not expire.  Instead, you pay a higher premium for your coverage.  The higher premium covers both the cost of the life insurance and the additional premium collected is used to invest the difference to help control the cost of coverage for the future.  Universal life insurance can generate cash value in a policy, but the cash value generation is not guaranteed.

Typically, people buy Universal Life for a less expensive permanent life insurance option.

Whole Life – This coverage is also considered “permanent.”  Whole life does not expire but is the most expensive life insurance option.  Buying whole life insurance builds guaranteed cash value every time you make a premium payment.  Typically, your whole life also includes an opportunity to take loans against your policy, and you can even cash in your policy if you decide you no longer need it.

Typically, people buy Whole Life insurance for permanent coverage and seek flexibility and guaranteed returns.