Understanding Life Insurance

Term Insurance – Form of Insurance that usually last for a certain period of time. (i.e. 30 year term) After term is over you have to replace ice. No cash value usually in the policy. Main types: Level Face-where the face or insurance amount is the same throughout the period. Reducing Term-Usually coincides with mortgage or other personal debt. The policy face or insurance amount decreases over time, often based on debt obligations. Whole Life -Type of insurance that you pay for your entire life. Level premiums and usually can borrow from cash value. An insurance that gives you the ability to have more insurance through the build-up of paid-up additions.Universal Life – It is life insurance that is a Combination of Whole Life and Term. Can build cash value, but is usually not good for anything if it is allowed to lapse. Usually cheaper than whole life but can last a lifetime if funded properly and sold correctly.

Variable Universal Life – A policy that is made of term and separate accounts (not mutual funds) and has a designated face amount. Policies have either a level face or an increasing face. The premise of the policy is to hope that the separate accounts in the policy outperform the returns in the other types of policies mentioned above. The cash value is based on the market-based returns of the separate accounts in the policy minus any expenses of the policy. The prospectus as well as a quarterly statement will reveal the returns of the separate account.