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Types of Life Insurance
There are several types of life insurance and many decisions to make when assessing your life insurance needs. The first of which is whether you need permanent insurance or term insurance. A simple comparison is owning or renting a home.
- Permanent Life Insurance is similar to owning a home, while temporary (term) insurance is similar to renting. Permanent life insurance usually meets long-term needs and may be the least expensive in the long run. The initial premiums are higher but can be guaranteed level, the policy builds cash value over time.
- Term Insurance is generally appropriate to meet short-term needs. The premiums are initially more affordable, but increase as you age. Policies are available that have set premiums for a determined amount of time (i.e. 5, 10, 15, or 20 years.) No cash value builds, and if you stop paying the premiums, the insurance lapses.
- Universal Life Insurance allows the flexibility to adjust the death benefit and/or premium payments, within limits, to fit your individual situation. The cash value can be withdrawn to meet financial emergencies, or to take advantage of opportunities.
There are also benefits to certain types of life insurance policies during your lifetime.
- The cash-value growth of a permanent policy is tax deferred. You do not pay taxes on the cash value increases while inside the policy.
- The cash value earned and borrowed from a permanent life insurance policy can be used to help with emergency expenses, college costs or retirement income. Policy loans reduce cash values and death benefits and may be subject to other charges outlined in the policy.
