Life Insurance

Term Life is the simplest and least expensive type of policy. It's pure insurance with no cash value account. A term life policy has only one function: to pay a specific lump sum to whoever you've designated, upon a specific event - - your death. The death benefit and the policy limit are the same - - a $200,000 policy pays a $200,000 death benefit. The policy protects your family by providing money they can invest to replace your salary, as well as to cover final expenses incurred by your death.

Other types of life insurance provide both a death benefit and a cash value account. Their premiums are larger than term life premiums, because they fund the savings account in addition to buying insurance. These policies are often referred to as cash value policies. They include:

Whole Life

Whole life insurance provides permanent protection for your dependents while building a cash value account. With this type of insurance, the insurance company manages the policies various accounts.

What it does:
It pays a death benefit to the beneficiary you name and offers you a low risk cash value account and tax-deferred cash accumulation.

It provides a fixed premium which can't increase during your lifetime as long as you continue to pay the planned amount.

It allows the insurance company to exclusively manage the cash value account in your policy.

It provides you the option to receive dividends from your policy or apply them to reduce payments.

It offers you the right to withdraw from the policy during your lifetime.

What it doesn't do:
It doesn't offer the account flexibility to invest in separate accounts such as money market, stock, and bond funds.

It doesn't allow you the account flexibility to split your money among different accounts or to move your money between accounts.

It doesn't offer premium flexibility.

It doesn't offer face amount flexibility.

Whole life insurance is more of an investment that includes an insurance policy. This type of insurance is not recommended.

Variable Life

Variable life insurance provides permanent protection for you and is the type of life insurance with account flexibility for the more risk-oriented policy holder.

What it does:
It pays a death benefit to the beneficiary you name and offers you low-risk, tax-free cash accumulation.

It allows the death benefit to vary in relation to the fund returns of the cash value account.

It allows you to borrow from the policy during your lifetime.

What it doesn't do:
It offers no guarantee to the amount of cash value during your lifetime.

It doesn't offer you premium flexibility.

It doesn't offer you face amount flexibility.

Universal Life

Universal life insurance provides permanent protection for your dependents and is more flexible than whole or variable life.

What it does:
It pays a death benefit to the beneficiary you name and offers you a low risk cash value account and tax deferred accumulation.

It allows you to earn market rates of interest on your cash value account.

It offers the right to borrow or withdraw from the policy during your lifetime.

It allows you premium flexibility.

It offers face amount flexibility.

What it doesn't do:
It doesn't offer you the account flexibility to invest in separate accounts such as money market, stock, and bond funds.

It doesn't allow you the account flexibility to split your money among different accounts or to move your money between accounts.

Universal Variable Life

Universal Variable life is the type of insurance which gives you more control of cash value account policy features than any other insurance type.

What it does:
It pays a death benefit to the beneficiary you name and offers you low risk tax deferred cash value options.

It offers separate accounts for you to invest in such as money market, stock, and bond funds.

It offers premium flexibility.

It allows you to make withdrawals or to borrow from the policy during your lifetime.

It stipulates that if you terminate the contract in early years you will receive less cash value total return than in a whole contract.

What it doesn't do:
It requires you, the policyholder, to devote time to manage the accounts. The policies long term success is contingent on the investment you make.

It doesn't work well with small premium amounts because your premium must cover your insurance and your accounts.