While life insurance does have many living benefits, for most people its primary purpose is to insure that loved ones will not suffer undue financial hardships in the event of your premature death. Life insurance is designed to provide your spouse with income for life, to create funds for a child’s education, to pay off debt and to ensure financial security for those you love. It will not replace the loss of a loved one, but it will be invaluable as it eliminates the stress of final uncertainty and other burdens that fall on survivors.
Don’t wait. This is one of the most important steps you can take to ensure that your family is taken care of financially when you are no longer with them. It can also be a valuable planning tool that provides you with living benefits.
Term Insurance: Without an investment component, term insurance is the simplest form of insurance. Simply put, you purchase coverage for a specific price for a specific period of time. If death occurs during that time, your beneficiary will receive the value of the policy.
Whole Life: You purchase the policy to cover your “whole life” and not just a set period of time. During the life of the policy, premiums remain level and the company invests a portion of your premiums. Mutual insurance companies share investment proceeds with policyholders in the form of dividends.
Universal Life: You decide the dollar amount that you want to contribute over and above the specified death benefit cost. In turn, the insurance company will pay some variable rate of interest. The investment and the returns will be placed into a cash-value account, which you may leave in the account to grow, or use to pay future premiums. With some policies, often referred to as Type I or Type A, the cash account becomes part of the face value of the policy upon the death of the policyholder. Another variety, Type II or Type B, allows the beneficiary to receive the face value of the policy plus the cash account.
Variable Life: Similar to universal life, except you choose from a wider selection of investment products, including stock funds, with a variable life policy. As with a universal life policy, returns on investments can offset the cost of premiums or be left to grow in the account. 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.