All life insurance is not the same. Life insurance can be divided into two basic categories — “term” and “permanent”.
Term life insurance provides coverage for a specific period of time, while permanent life insurance provides coverage for the insured person’s entire life.  Both types pay what is known as a death benefit, which is the amount of money paid out upon the insured’s death.  This money is paid to the person or persons designated by the insured. These people are known as the beneficiaries.  The following pages explain the features of term and permanent life insurance policies, and also compare the two so you can better understand what each type of coverage offers. Later in this guide you will find a worksheet to help you  evaluate your needs and choose a policy type that meets those needs.  As always, if you have questions about the types of life insurance available call us today.  (800)420-8628

Whenever a loved one dies, the surviving family members face many unexpected expenses. In addition, the deceased may have been a primary earner for his/her family, and the loss of that income can be devastating. How will the family pay the mortgage and the car payments? Will there be enough money for the child’s college or other educational expenses? What about credit card debt or other debts the family still has to pay?
The proceeds from a life insurance policy can go a long way towards stabilizing a family’s finances. Immediate expenses can be covered and debts can be met. Long term financial needs, such as educational expenses, can be covered and mortgages can be paid off. In short, the proceeds of life insurance can help replace the deceased’s  income and provide financial assistance to the loved ones left behind.

The death benefit decreases periodically as specified by the policy. Premiums typically remain constant throughout the policy term.  Term life is the simplest form of life insurance. It provides a pure death benefit. The policy will cover the insured for a specified period of time (the “term”), such as 10 or 20 years, or until a specified age. If you purchase term life insurance  at a younger age, you can usually buy more at a lower cost.  Term insurance generally does not build a “cash value.” At the end of the term period, the policy typically  terminates without any remaining benefits or monetary value.  Term insurance is ideally suited to cover specific needs that may decrease or disappear over time. 

There are three major types of term life insurance:
Level — The death benefit stays the same throughout the policy term and premiums typically remain constant.
Increasing — The death benefit increases by specific amounts and at intervals as specified in the policy. Premiums
normally increase along with the benefit.
Decreasing — The death benefit decreases periodically as specified by the policy. Premiums typically remain constant throughout the policy term.

Permanent life insurance is designed to provide protection for the entire life of the insured person, as long as the premiums are paid. There are many different versions and variations of permanent insurance.

FEATURES OF PERMANENT INSURANCE

Permanent insurance offers some features that are different than those found in term life insurance policies.

Cash Value — The cash value is an amount available to a policyowner if the policy is canceled (surrendered).  Cash value may also be used as collateral on a policy loan. Cash value generally increases over time as premiums are paid.

Policy Loans — A policyowner may borrow an amount up to the maximum loan value of the permanent policy. Loan interest will be charged in accordance with the policy provisions. The loan may be paid back
in a lump sum or installments. If at any point the amount of the loan plus interest exceeds the policy’s cash surrender value, the policy may be terminated without further value. At the insured’s death, any outstanding
loan and interest will be deducted from the death benefit.

Participating versus Non-Participating — Participating policies may pay dividends. Non-participating policies do not. Dividends are refunds of the insurance company’s excess or unused premiums. Dividends are not
usually distributed until the second policy year; however, they are never guaranteed.

There are typically several available dividend options, such as:

Cash Payment — The dividend can be paid directly to the policyowner in cash.
Premium Reduction — The dividends can be used to pay part of the premium. The insurance company will send a statement showing the amount of the dividend and balance of premium due, if any.
Interest Option (Left on Deposit) — The dividends can be left with the insurance company to earn interest. All or part of this money may be withdrawn at any time.
One Year Term — This option allows for the purchase of one year term insurance that will be payable in addition to the face amount of the policy.
Paid-up Additions — The dividends can be used to purchase paid-up additional life insurance.