Types of Life Insurance - What's the Difference?

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The list below gives you the basic facts and pros and cons of the four standard types of individual life insurance. Contact us to discuss these differences and to determine if your current coverage still meets your needs.

Policy Type – Temporary Insurances:

1. Term:

  • Coverage Period: Temporary, often expires at age 70 or 85, depending on the term in the contract.
  • Premiums: Premiums renew (increase) at each specified term (e.g. 10 years, 20 years, etc.)
  • Death Benefit: Does not change and is guaranteed.
  • Cash Values: Usually no cash values.

Advantages:

  • Suitable for short term needs, or a specific debt like a mortgage.
  • More affordable. Initially less expensive than permanent insurance.
  • Can be converted to permanent insurance without medical evidence up to age 65 or 70 (if contract has a convertibility option).

Disadvantages:

  • At each renewal, premiums will increase and become more costly as you get older.
  • Coverage usually expires at age 70 or 75.
  • With no cash value, if premiums are not paid, the policy will terminate.

2. Term 100:

  • Coverage Period: Lifetime coverage.
  • Premiums: Premiums remain the same for the entire contract.
  • Death Benefit: Does not change and is guaranteed.
  • Cash Values: Usually no cash values, but guaranteed values are available in some contracts.

Advantages: *Also applies to Term 100 Temporary Insurance and both forms of Permanent Insurances

  • Provides protection for your entire lifetime - if kept in effect.
  • Premiums usually stay the same, regardless of age or health.
  • The cash value can be used to continue coverage if premiums are missed or it can be withdrawn.
  • Participating policies receive dividends that can be taken in cash, left to accumulate with interest, or used to purchase more coverage.
  • Growth on additional deposits is not taxed unless withdrawn from the policy.

Disadvantages: *Also applies to Term 100 Temporary Insurance and both forms of Permanent Insurances

  • Initial costs may be too high for a sufficient amount of protection for your current needs.
  • May not be an efficient way of covering short-term needs.
  • Cash values tend to be small in the early years. You may have to hold the policy for a long time (at least 10 years) before cash values will accumulate significantly

Policy Type - Permanent Insurances:
1. Whole Life (participating or "par" policies):

  • Coverage Period: Lifetime coverage.
  • Premiums: Premiums remain the same for the entire contract.
  • Death Benefits: Does not change and is guaranteed. Dividends may be used to increase the face amount.
  • Cash Values: Guaranteed in contract.

2. Universal Life:

  • Coverage Period: Lifetime coverage.
  • Premiums: Flexible. Premiums can be increased or decreased within certain limits.
  • Death Benefits: Flexible. May increase or decrease due to fluctuations in cash values.
  • Cash Values: Some guarantees. May increase or decrease due to investment returns and deposit levels.

Securing your Family's Future

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