Life Insurance is the foundation of financial security for you and your family. It protects your financial resources against the uncertainties of life and enables you to plan for the future.

Types of Life Insurance:

• Term Insurance
• Permanent Insurance

Term insurance

Term life insurance provides protection for a specified period of time, such as 10, 20 or 30 years and requires the smallest initial cash outlay. This type of life insurance is generally the least expensive form of life insurance. It is purely "insurance", which means it pays a death benefit to your beneficiary or beneficiaries, usually a family member or a loved one you’ve chosen, should you die during the term specified in your term life insurance policy. Most term policies are renewable only to a certain age. The age varies by policy and insurer, but it’s typically to age 75. Term policies do not build cash value, and as the insured ages, the cost of the insurance increases each year upon renewal. This type of insurance offers affordability and flexibility. 

Additional Features of a Term policy:

• A death benefit is paid to the beneficiary if the insured dies while the policy is in force.
• There are no benefits paid at the expiration of the policy or if the insured dies after the policy expires.
• Generally purchased by those with a temporary need for life insurance, or by those with limited budgets.
• May be appropriate for specific needs, including the needs of business owners.

Permanent life insurance

Permanent life insurance is a life insurance policy that accrues cash value. Cash value is the savings component of a permanent life insurance policy. This type of insurance is ideal for those with long-term needs, as it offers fixed premiums and builds a tax-deferred cash value, and provides death benefit protection for as long as you live. There are significant tax advantages associated with a permanent life insurance policy, and the substantial cash value makes it a wise investment over time. There are several types of permanent insurance policies available, but the most common are whole life and universal life policies. The main differences between the different types of life insurance policies are the premium payment flexibility, the cash value investment options and the death benefit guarantees.

Three types of permanent insurance.

• Whole Life Insurance
• Universal Life Insurance
• Variable Life Insurance
  

Whole Life Insurance

Whole life insurance is a form of cash value life insurance that covers an insured for an entire lifetime, assuming all premiums are paid as specified in the whole life insurance policy. It builds cash value that the policyholder can redeem or borrow, and it pays the policy death benefit upon the death of the insured. Whole life insurance policies are considered permanent because they do not expire, as long as premiums are paid. The premiums are usually level, the death benefit is guaranteed by the insurance company and the cash value increases every year. Premiums are typically due each year for the life of the insured, and whole life policies often pay policy dividends. You may choose to invest these policy dividends, subject to the terms and conditions of the policy. Use the dividends to either pay premiums or purchase additional life insurance coverage. Whole life insurance often appeals to those who are seeking a level premium, a fixed death benefit and a cash value. All guarantees are based on the claims paying ability of the issuing insurance company.

Universal Life Insurance

Universal life insurance is a flexible-premium, adjustable benefit life insurance policy that accumulates cash value. The flexibility of this policy allows you to change the amount of insurance as your needs for insurance change. It is a cost-effective way to meet both temporary needs like settlement expenses and outstanding debt, and long-term needs such as mortgage protection, education funding and retirement planning. You can make lump sum payments, (subject to certain tax limitations) and in some cases, you can skip payments. Naturally, one must pay a satisfactory amount of premiums into the policy to cover the cost of the policy, which includes the cost to provide the death benefit.
Paid premiums are applied to the cash value, which earns an interest rate as declared by the insurance company. The cost of the death benefit and administrative costs associated with the policy are deducted, typically monthly, from this cash value. The interest rate credited to the cash value is subject to change but will never fall below the minimum rate guaranteed in the contract. Most universal life contracts offer a choice of either the death benefit selected, or the death benefit selected plus the accumulated cash value. This type of policy also allows you to change the death benefit; however, any increases may require evidence of insurability.
If the cash value increases and totals an amount slightly below or close to the death benefit, your death benefit will automatically increase. This is due to certain provisions in the tax code. You may withdraw or borrow against the cash value at any time. You may be able to withdraw part of the cash value without having the withdrawal treated as a policy loan, but keep in mind, loans reduce the death benefit. If at any time the cash value is not sufficient to pay for the costs of the policy, the policy will lapse. Many universal life contracts may be structured in such a way that the death benefit is guaranteed for a certain period of time or for the life of the insured, provided the required premiums are paid.

Variable Life Insurance
Variable universal life insurance, commonly referred to as VUL, is a versatile product which provides both insurance protection and investment components. Variable universal life insurance, like universal life insurance, allows you the freedom to choose the amount and timing of your premiums, subject to company minimums and IRS maximums. You may choose to increase or decrease the death benefit, depending on policy minimums and underwriting requirements. The main difference between the two policies is that Universal policies offer fixed rates of return, whereas a VUL policy provides possibilities for higher returns due to the investment component within the product.

Available investment funds can range from money market funds to stock and bond funds, depending on the insurance provider. The cash value of the policy is directly related to the performance of the funds that you've selected, and it should be noted that the cash value can potentially fall to zero if the investment funds perform unfavorably. The cost of the insurance protection in a variable universal life insurance policy component is also usually deducted from the cash value of the policy.