If you talk to anyone on the street about life insurance, you will likely find that the person you’re talking to can describe one or two types of life insurance. Most people can’t name them, but they do have a general idea about how they work. In general, most people don’t have a very accurate or exhaustive awareness of the different life insurance options afforded to individuals.
That’s fine. Not everyone is a life insurance professional. However, if you find that you need life insurance (or simply suspect that it might be a good idea for your situation), it’s important to get a basic understanding of the options available to you before consulting an agent who might be trying to sell you one or other specific product.
Below is a basic overview of the most common forms of life insurance. Not all of these are offered through all life insurance providers. However, if you find one that works especially well for you and your family/dependents, it may be worthwhile to look until you find a company offering exactly the service you’re hoping to set up for yourself.
Term – Term Life Insurance is a policy that will pay a specified death benefit amount if your life should come to an end within a specific time period as long as premium payments are made. A term life insurance policy might come in handy during a time when you are particularly at risk, when your family’s life is especially vulnerable or any other case where your death would be a large financial burden on people you care about.
Permanent – Permanent life insurance is exactly what it sounds like. As long as you maintain your premium payments, your coverage is can last your life time. Different types of permanent products offer a cash value accumulation feature which grows tax-deferred1 and is available to the policyowner as needed.
Whole Life – A type of permanent life insurance, whole life insurance is guaranteed for life, so long as monthly premium payments are made. These are generally higher than term life payments because the payment is paid out, sooner or later. Whole life insurance is considered a cash value type of life insurance.
Universal Life – Also a type of permanent life insurance, universal life insurance is a versatile policy type that often offers low monthly payments as with Term life, while also allowing for a cash value growth, as already described in the permanent life insurance section above. One popular feature of universal policies is the ability to use interest earned from the policy to pay the premium payments.
Indexed Universal Life – Indexed universal life is similar to universal but the death benefit is combined with the opportunity to grow cash value through an account that credits interest based upon the upward movement of stock market indices, without the downside risk of investing directly in the market.2
Variable Universal Life – Variable universal is much like universal life insurance, with a greater emphasis on investment and potential cash value increase through returns.
Survivorship – This type of insurance policy covers two individuals and makes payment to beneficiaries only when both parties have died.
All of these life insurance products have their benefits for certain types of individuals. And consider all factors that are important to you – such as the provider’s history and service to national and local communities. Find what works for you and seriously consider starting a policy for the good of the people you love.
- The taxdeferred feature of the universal life policy is not necessary for a taxqualified plan. In such instances, you should consider whether other features, such as the death benefit and optional riders make the policy appropriate for your needs. Before purchasing this policy, you should obtain competent tax advice both as to the tax treatment of the policy and the suitability of the product.
- Indexed Universal Life Insurance products are not an investment in the “market” or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance. Life insurance policies have terms under which the policy may be continued in force or discontinued. Current cost of insurance rates and interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. The Index Accounts are subject to caps and participation rates. In no case will the interest credited be less than 0 percent. The policy’s death benefit is paid upon the death of the insured. The policy does not continue to accumulate cash value and excess interest after the insured’s death.
Neither Midland National Life Insurance Company nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.