Term life insurance is a very inexpensive way to buy protection for a specific period of time and pays a death benefit only if the insured dies during the “term” while the policy is in force. Term periods (number of years where the premiums remain level) are typically 10, 15, 20, 25 and 30 years with a few products that can be tailored to the specific length needed such as 17 years or 21 years and so on. Some newer products offer 35 and 40 year terms also. Term laddering helps save premium dollars and provides the much needed coverage. It is important to consider the convertible and renewable features of the term policy since they help if the insurability changes and coverage is needed beyond the term period.
Return of Premium (ROP) Term
Term alternative – if the insured outlives the policy term, the carrier will return all premiums paid to the policy owner (excludes premiums for riders and table ratings). With some products, there is an option to purchase paid up policies with the premium refund amount.
Universal Life (UL)
Universal life insurance provides lifetime death benefit protection along with flexibility in premium payments that gives you choices as your needs and finances change. It offers options to change coverage amounts and premiums that you can vary based on your situation as long as there is enough money in the account to pay for the monthly insurance and administrative charges.
Indexed UL (IUL)
These are UL policies that give you the potential for growth at a higher rate of interest without the risk of being directly in the market. Unlike a traditional universal life insurance policy where the insurance company sets the interest rate, an indexed universal life policy credits interest to your cash value based on the movement of a major-stock market index.
Survivor/2nd to Die UL (SUL)
Survivorship life insurance covers the lives of two individuals with one policy. It pays only one death benefit after both insureds have died. The cost for this policy is usually lower than the cost of two individual policies and is used in Estate planning and advanced planning scenarios.
Whole Life (WL)
Whole life insurance provides protection for a lifetime as long as the policy is in force. It offers guaranteed premiums that will not increase, a guaranteed death benefit and guaranteed cash value growth. Some whole life policies earn dividends. The dividends can be withdrawn out of the policy or can be used to buy paid up additional death benefit. The cash value can be used to supplement the income for retirement or for other short term needs.