Term Life Insurance

Definition: Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years. If you die within the term, your beneficiaries receive a death benefit. If you outlive the term, the coverage expires.

Key Features:

  • Affordable: Generally the most affordable type of life insurance, especially for younger and healthier individuals.
  • Simple: Easy to understand with a straightforward death benefit payout.
  • Temporary: Provides coverage for a set period, making it suitable for temporary needs like covering a mortgage or providing for children until they reach adulthood.
  • No Cash Value: Does not accumulate cash value.

Whole Life Insurance

Definition: Whole life insurance provides lifelong coverage as long as you pay the premiums. It also includes a cash value component that grows over time.

Key Features:

  • Lifelong Coverage: Provides protection for your entire life.
  • Guaranteed Cash Value: Accumulates cash value on a tax-deferred basis, which can be borrowed against or withdrawn.
  • Fixed Premiums: Premiums remain level throughout the life of the policy.
  • More Expensive: Generally more expensive than term life insurance.

Universal Life Insurance

Definition: Universal life insurance offers lifelong coverage with more flexibility than whole life insurance. It allows you to adjust your premiums and death benefit within certain limits. It also has a cash value component.

Key Features:

  • Flexible Premiums: You can adjust your premium payments, within limits, as your needs and financial situation change.
  • Adjustable Death Benefit: You can increase or decrease your death benefit, subject to certain restrictions.
  • Cash Value Accumulation: Earns interest on the cash value component, although the interest rate may fluctuate.
  • More Complex: Can be more complex to understand than term or whole life insurance.

Variable Universal Life Insurance

Definition: Variable universal life insurance combines the flexibility of universal life insurance with investment options. You can allocate your cash value among different investment subaccounts, similar to mutual funds.

Key Features:

Most Complex: The most complex type of life insurance, requiring careful consideration and potentially professional financial advice.

Investment Options: Allows you to invest your cash value in various subaccounts, potentially earning higher returns.

Market Risk: The cash value is subject to market fluctuations, meaning it could lose value.

Greatest Flexibility: Offers the most flexibility in terms of premiums, death benefit, and investment options.