Life Insurance Frequently Asked Questions
The main types of life insurance on the market today fall into two categories: term and permanent.
Put simply, term life insurance provides death-benefit protection for a specified period of time. Generally speaking, if you are looking for coverage for a short period of time, term life makes more sense.
But if you are looking to have a policy for the rest of your life or have investment goals, permanent insurance is a better fit. All life insurance policies will require that you meet certain underwriting criteria.
Term Life Insurance
Non-Guaranteed Term Life – Non-guaranteed term life provides coverage only for a short time (usually a year) and is pure death-benefit protection. The risk with term life is that your health might deterioate and you could be unable to get another policy once the term is up. Premiums can also increase dramatically as you age, but term insurance is usually a good choice for young people who can’t afford the higher expense of permanent insurance, or for people covering specific needs that will disappear in time, such as a car loan or mortgage.
Renewable and Convertible Term – Renewable term insurance is offered for 1, 5, 10, 20 or 30 years. By buying a longer term policy, your costs can be stretched out to avoid the annual increases found in non-guaranteed term life.
Renewable term that is convertible, offers conversion to a permanent policy in the future. Convertible term policies usually provide the maximum protection with the smallest amount of cash outlay required. This is a good choice especially for young people who are unable to afford the higher cost of permanent insurance right now but need maximum life insurance and also what to have the option of converting to permanent coverage in the future.
Permanent Life Insurance
Whole Life or Ordinary Life – Similar to renewable and convertible term, whole life policies stretch the cost of insurance out over a longer period of time in order to level out the otherwise increasing cost of insurance. In this case, however, it is spread out over your entire life.
Universal Life – This option offers additional flexibility over whole or term life. After your initial payment, you can reduce or increase the amount of your death benefit. Also, after your initial payment, you can pay premiums any time in almost any amount within the policy’s required minimums and maximums.
Variable Life – There are both Universal and Whole Life versions of Variable Life. This option provides death benefits and cash values that fluctuate with the performance of the insurance company’s portfolio of investments. The cash value is not guaranteed, but you get to choose where your premium dollars go among the variety of investments in the portfolio. Thus, while there is no guaranteed cash value, you have control over your money and can invest it according to your own tolerance for risk.
