Term life insurance is defined as a life insurance policy that provides a stated benefit upon the death of the policyholder if the death occurs within a certain time period. However, unlike an insurance policy, which allows investors to share in the returns from the insurance company's investment portfolio, the policy doesn't provide any returns beyond the stated benefit.
Annually renewable term life:
Historically, as the risk of death increased, so did the term life rate. While unpopular, this type of life insurance policy is still available and is commonly known as annually renewable term life insurance (ART).
Guaranteed level term life:
Many companies now provide level term life insurance. The premiums on this type of insurance policy are intended to remain constant for a period of 5, 10, 15, 20, 25, or even 30 years. Level term life insurance policies have grown in popularity due to their low cost and ability to provide relatively long-term coverage. But be cautious! The majority of level term life insurance policies include a guarantee of level premiums. Some policies, however, do not provide such guarantees. Without a guarantee, the insurance company may surprise you by raising your life insurance premium, even if you expected your premiums to remain constant. Needless to say, it is important to make sure that you understand the terms of any life insurance policy you are considering.
Return of premium term life insurance:
Return of premium term insurance (ROP) is a relatively new type of insurance policy that guarantees a refund of life insurance premiums at the end of the term period if the insured is still alive. This type of term life insurance policy is slightly more expensive than standard term life insurance, but the premiums are intended to remain constant. These premium return term life insurance policies are available in 15, 20, and 30-year term lengths. Consumer interest in these plans has grown year after year because they are often significantly less expensive than permanent types of life insurance, but they may still offer cash surrender values if the insured does not die.
Types of Permanent Life Insurance Policies:
A permanent life insurance policy, by definition, is one that provides life insurance coverage for the insured for the rest of his or her life as long as the premiums are paid. A permanent life insurance policy also includes a savings component that accumulates cash value.
Universal Life:
Life insurance that combines term life's low-cost protection with a savings component invested in a tax-deferred account, the cash value of which may be available for a loan to the policyholder. Universal life insurance was developed to provide more flexibility than whole life insurance by allowing the policyholder to transfer funds between the insurance and savings components of the policy.
Furthermore, the inner workings of the investment process are openly displayed to the holder, whereas details of whole life investments are typically scarce. The insurance company divides variable premiums into two categories: insurance and savings. As a result, the policyholder can adjust the policy's proportions based on external conditions. If the savings are yielding a low rate of return, they can be used to pay the premiums rather than injecting more funds. If the holder is still insurable, a larger portion of the premium can be applied to insurance, increasing the death benefit. In contrast to whole life investments, cash value investments grow at a variable rate that is adjusted monthly. Typically, there is a minimum rate of return. These changes to the interest scheme enable the holder to profit from rising interest rates. The risk is that falling interest rates will cause premiums to rise and, in the worst-case scenario, the policy will lapse if interest can no longer cover a portion of the insurance costs.
To age 100 level guaranteed life insurance:
This type of life insurance provides a guaranteed level premium until the age of 100, as well as a guaranteed level death benefit until the age of 100. Most of the time, this is accomplished through the addition of a feature known as a "no-lapse rider" to a Universal Life policy. Some, but not all, of these plans also include an "extension of maturity" feature, which states that if the insured lives to the age of 100 while paying the "no-lapse" premiums each year, the full face amount of coverage will continue on a guaranteed basis at no cost thereafter.
Survivorship or 2nd-to-die life insurance:
A survivorship life policy, also known as 2nd-to-die life, is a type of coverage that pays a death benefit upon the death of two insured individuals, typically a husband and wife, at a later date. Since the mid-1980s, it has become extremely popular with wealthy individuals as a method of discounting their inevitable future estate tax liabilities, which can, in effect, confiscate up to half of a family's entire net worth!
In 1981, Congress established an unlimited marital deduction. As a result, most people arrange their affairs in such a way that any estate taxes are deferred until the death of the second insured. A "2nd-to-die" life policy allows the insurance company to postpone payment of the death benefit until the death of the second insured, generating the funds needed to pay taxes when they are needed! This coverage is popular because it is significantly less expensive than individual permanent life insurance on either spouse.
Variable Universal Life:
A type of whole life insurance that combines some aspects of universal life, such as premium and death benefit flexibility, with aspects of variable life, such as more investment options. Variable universal life enhances universal life's flexibility by allowing the account holder to select from a variety of investment vehicles for the savings portion of the account. The tax advantages and fees associated with the insurance policy distinguish this arrangement from investing individually.
Whole Life:
Insurance that provides coverage for an individual's entire life, rather than just a specified period of time. A savings component, known as cash value or loan value, accumulates over time and can be used to build wealth. Whole life insurance is the most fundamental type of cash value insurance. The insurance company is essentially in charge of all policy decisions. Regular premiums cover insurance costs while also building equity in a savings account. The beneficiary receives a fixed death benefit in addition to the balance of the savings account. Premiums are fixed for the duration of the policy, even if the balance between insurance and savings shifts toward insurance over time.
Management fees eat up a portion of the premiums as well. Because the insurance company will primarily invest in fixed-income securities, the savings-investment will be subject to interest rate and inflation risk.
Life Carrier Direct was founded by managing partners with a combined life insurance experience of over 70 years. Most people want life insurance to protect the people they care about from unexpected death, so that they can be financially protected to cover things like lost household income, education funding, mortgage satisfaction, and other important financial considerations related to the sanctity of the family.
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