Life Insurance is a contract between you, as the policyholder, and the insurer. You agree to pay a fee, or premium, usually monthly, for this coverage. The insurance company promises to pay out an agreed-upon sum when the insured person dies or after a certain time.
There are two major kinds of life insurance:
- Term Life – Term policies are contracts for a certain number of years. These policies are ideal for almost everyone. If the insured does not die in the time specified in the policy, the policy simply expires, and there is no payout.
- Permanent (Whole) Life – A permanent life policy lasts the entire life of the insured and often includes an aspect of a cash value. Depending on the policy details, you can make certain withdrawals or use the policy as collateral to borrow against during the lifetime of the insured.
Term Life
Term life sets a finite length of time, or term. Your policy will usually specify 1 year, 5 years, and multiples of 5 years up to 30 years. You can choose your coverage amount based on your requirements, and many are over a million dollars.
- Level premium policies will lock in the same premium amount for the entire policy length, with increases at renewal dates only. These are ideal for covering a longer-term commitment, like replacing your income for your family or paying off the mortgage.
- Annual renewable policies run for only a year. These policies are ideal when you have short-term debts or only need coverage for a short time.
This is the most affordable kind of life insurance. But when you outlive the term of the policy, there is no cash value or payout.
Permanent (Whole) Life Insurance
Permanent life policies usually last as long as you pay the premiums or until your death. Generally, premiums remain stable, with a guaranteed return on the cash value. Plus, the death benefit stays the same.
A permanent life policy is more expensive than term insurance. But this policy will stay with you throughout your life and continually build a cash value.
Every individual and family has unique life insurance needs. Talk to our experts to learn more about which type or types of life insurance are best for you.