What are the different types of Life Insurance?

Temporary Life Insurance

Term

Term life insurance is one of the most popular and affordable life insurance programs. It is temporary life insurance because it will expire after a set number of years selected. The monthly premium cost is fixed for the number of years of the term. Each life insurance company has different conversion options, if any. If available, at any time prior to the expiration policy the owner can decide “convert” the same or lower death benefit to another term or in most cases a permanent policy, without a new medical exam. The price of the new policy would be based on the new product selected, the new age of the client and the original health rating. If a client is looking to have long-term coverage, it’s best to select a term carrier that has more conversion options.

Return of Premium

ROP is also temporary term insurance, but for a higher premium cost, it will return the all premiums paid for coverage if the insured party outlives the policy’s term. Statistically, since most people outlive their term insurance the ROP gives clients the satisfaction of knowing that there is a high probability they will have their entire premium returned at the end of the term. For example, a $1,000,000 policy bought for $10,000 a year over a 30 year period would result in $300,000 being refunded to the surviving policyholder at the end of the 30 years. The “cash value” grows each year slowly and reaches 100% at the end of the term. Only a handful of carriers offer ROP, such as Transamerica, Prudential, Voya, and Assurity. (Rich double check carriers)…

Permanent Life Insurance

Universal Life

Most agents are unfamiliar with the “Universal Life” product. Also referred to as Guaranteed UL, all A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup.

Index UL

A permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index. Indexed universal life insurance policies typically contain a minimum guaranteed fixed interest rate component along with the indexed account option.

Whole Life

A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component pays a stated amount upon death of the insured. The investment component accumulates a cash value that the policyholder can withdraw or borrow against.

Final Expense

A basic type of life insurance that is used to pay for funeral services and merchandise costs. This policy usually covers people until they reach the age of 100. Applicants do not have to go through a health exam in order to obtain it, they are usually asked to swear that they are not currently ill or in a nursing home.

Single Premium Whole Life

An insurance plan in which a lump sum of cash is paid up front to guarantee payment to beneficiaries. Because single-premium policies are instantly fully funded, the money invested builds up rapidly, making for a potentially sizable benefit even in the event of the policyholder’s sudden death.

Second to Die

A type of life insurance on two people (usually married) that provides benefits to the heirs only after the last surviving spouse dies. This differs from regular life insurance in that the surviving partner doesn’t receive any benefits after their spouse dies. Thus, second-to-die insurance is used for estate planning.