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Term Vs. Cash Value Insurance
Term Insurance
Term Life Insurance provides death
benefit coverage for a specified number of years.
Term insurance does not typically provide cash
value, but it offers a lower initial premium than
Whole Life insurance.
Here are some things you might
want to consider when purchasing term insurance:
• Premium amount upon
renewal
• The age upon which you
lose your right to renew a policy
• Your conversion privileges.
Cash Value Life Insurance
There are three types of life insurance
that generate cash value; whole life, universal
life and variable life. In these types of insurance,
the premiums charged are higher initially than
they would be for term insurance. The part of
the premium that is not used for the cost of insurance
and expenses is invested by the company and builds
up a cash value that may be used in a variety
of ways.
Whole Life Insurance pays a benefit
at death or maturity, if earlier. Traditional
Whole Life pays a fixed guaranteed cash value
schedule, which does not vary based on experience.
Interest Sensitive Whole Life provides a guaranteed
fixed cash value schedule. Excess interest, if
any, may also accumulate and be added to your
cash value.
Universal Life Insurance is a flexible
policy that lets you vary your premium payments
and the face amount of your coverage. Increases
in coverage may require proof of good health.
The premiums you pay (less expense charges) go
into an account. At the beginning of each month,
cost of insurance and expense charges are deducted
from that account. At the end of each month, interest
is credited based on the account balance.
Variable Life Insurance gives you
the opportunity to direct your cash value investments
to different separate accounts that are available.
Be sure to get the prospectus from the company
and STUDY IT CAREFULLY when considering this type
of policy. You will probably have higher death
benefits and cash value if underlying investments
do well. However, cash value and death benefit
could decrease or disappear if investments do
not perform well. You may pay an extra premium
for a guaranteed death benefit.
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To Help You Choose A Type
Of Insurance
Life Insurance Illustrations
You may be thinking of buying a
policy where cash values, death benefits, dividends
or premiums may vary based on events or situations
the company does not guarantee (such as interest
rates). If so, you may get an illustration from
the agent or company that helps explain the policy
values. The illustration will also show you what
the company guarantees.
Finding a Good Value in
Life Insurance
After you have decided what kind
of life insurance is best for you, compare similar
policies from different companies to find which
one will best meet your needs. Be sure to consider:
- Your risk tolerance if premiums and cash
value vary, based on experience;
- Whether premiums or benefits vary from year
to year;
- Whether cash value is available;
- The length of coverage, based on your needs;
- What is the effect of interest on money paid;
- Any special policy features that particularly
suit your needs.
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What
Type Of Life Insurance To Purchase