Life Insurance

There are many types of life insurance, all designed to fit individual needs and circumstances. The following are some of the basic types of life insurance available:

Term Insurance – This is simplest form of life insurance.  With Term Insurance, you purchase coverage for a specific price covering a specified period. If you die during that time, your beneficiary receives the value of the policy. There is no investment component.

Whole Life - Similar to Term Insurance, but you purchase the policy to cover your "whole life" not just a set period. Premiums remain level throughout the life of the policy, and the company invests at least a portion of your premiums. Some firms share investment proceeds with policyholders in the form of a dividend. Many companies will offer "a relatively low guaranteed rate of return," but sometimes pay at a rate in excess of the guarantee.

Universal Life - You decide how much money you want to put into the policy over and above a minimum premium. The company chooses the investment vehicle, which is generally restricted to bonds and mortgages. The investment and the returns go into a cash-value account, which you can use to pay premiums or allow to accumulate.

• With some policies - sometimes called Type I or Type A - the cash account is applied toward the face value of the policy upon the death of the policyholder.
• With a second variety - sometimes called Type II or Type B - the beneficiary receives the face value of the policy, plus all or most of the cash account.
• While Type II is meant to provide a partial hedge against inflation, it does demand higher premiums as the policy holder grows older than in the case of Type I policies.

Another variation of a universal policy, often called Universal Variable Life, allows policyholders to choose investment vehicles.

Variable Life - With a variable policy, there is usually a wider selection of investment products, including stock funds. As with a universal policy, returns on investments can offset the cost of premiums or accumulate in the account. And depending on the type of policy, the beneficiaries will either receive the face value of the policy or the face value plus all or part of the cash account.