Types of life insurance coverage
Types of
Coverage
The following are different types of life
insurance policies and their characteristics. Keep in mind that
the intent of life insurance is to provide for the life of your
heirs and/or beneficiaries for such things as payment of debts
and to provide family income. In addition, the policy can provide
supplemental income for retirement.
TERM LIFE
- Low
initial premium.
- May be
renewable and convertible to whole life insurance.
- Protection
for a specified period.
- Premium
increases with each new term.
- Typically
no cash value.
TRADITIONAL WHOLE LIFE
- Permanent
protection.
- Fixed
premium.
- Fixed
cash value.
- Fixed
death benefit.
- You can
defer taxes on the earnings generated by the policy until
you withdraw cash, take out a loan policy, or receive
annual interest earnings on dividends.
UNIVERSAL LIFE
- Flexible
premium.
- Flexible
death benefit.
- Cash
value reflects premiums paid and current interest after
deducting the cost of death benefits and other expense
charges.
- You can
defer taxes on the earnings generated by the policy until
you withdraw cash or take out a policy loan.
EXCESS INTEREST WHOLE
LIFE
Permanent protection.
- Fixed
premium.
- Fixed
death benefit.
- Cash
value growth depends on current interest credited to the
cash value account. If you have a fund and your insurance
company credits excess interest to the fund it will grow
faster.
- You can
defer earnings generated by the policy until you withdraw
cash, take out a loan policy, or receive annual interest
earnings.
VARIABLE LIFE
- Long-term
protection.
- Fixed or
flexible premiums.
- Policyholders
sometimes control the investment of their cash values in
stock, bond, money market or other accounts and bear all
the investment risk.
- Death
benefits and cash values vary in relation to the
performance of funds in a separate account.
- You can
defer taxes on the earnings generated by the policy until
you withdraw cash or take out a policy loan.
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