Life Insurance

Term Life

Guaranteed Universal Life

Index Universal Life

Whole Life

Life with Living Benefits

Final Expense

Term Life Insurance

Essentially termporary life insurance. It is usually purchased with a specific time period in mind. In today’s marketplace 10, 15, 20 and 30 years are the most popular choices. The price is fixed and guaranteed for the period of time chosen. The longer the time period, the higher the premium. At the end of that fixed premium period, the cost will jump dramatically and continue to do so each year. Instead of raising the premium, a few products lower the death benefit substantially and continue to do so each year. Many riders are available, such as Return of Premium, Waiver of Premium, Child Riders, Accidental Death and more. Most products are convertible without evidence of insurability for set time period. The best products guarantee conversion to any permanent product the company has available for sale at the time of conversion.

Pros: Lower initial premium than permanent options, easy to understand.

Cons: Becomes very expensive if needed after the initial term period ends, does not address possible need for coverage beyond the initial term period and conversion option may not offer an attractive solution, limited living benefits are available, no cash value available unless Return of Premium rider is elected at purchase.

GUL

This plan offers the lowest cost guaranteed level premium for lifetime coverage. Also, the premium can be “dialed back” to guarantee the death benefit for shorter time periods, but still longer than term life plans will usually go. It can be designed as a planned premium for life or for a shorter time frame such as 10 years, 20 years or to age 65. These permanent plans usually do not include any substantial cash value build up, but there are many attractive living benefit options that can be added. Including Return of Premium (money back guarantee in 20 to 25 years), LTC/Chronic Illness Coverage and even Guaranteed Income Options. This plan is available on single life or joint last survivor life basis.

Pros: Lower premiums than Whole Life while maintaining lifetime death benefit guarantee, outstanding living benefit riders available on many plans.

Cons: No substantial cash value buildup or availability, not much flexibility compared to current assumption universal life plans.

Index UL

This plan is designed to have a flexible premium, provide permanent life insurance coverage and potentially enhanced cash values above what might be realized in a traditional universal life or whole life plan. This is purported to be possible by allowing the policy owner to choose between various cash value crediting methods. The choices are usually a fixed crediting rate and several “Index” methods. The Index crediting rates being determined by the performance of a specific stock or bond index. The upside is limited by a cap or participation rate declared each year by the insurance company. The company guarantees that the crediting rate cannot be less than zero and, in some plans, not less than one or two percent over a set period of time. Projected premiums can sometimes be lower than traditional UL and even guaranteed universal life plans depending on how aggressive the crediting rate is illustrated. This plan requires annual review and management in order to be prudently used for life insurance protection. Some of these plans also have living benefit options included or available as riders.

Pros: Flexible premium, possible low premiums for lifetime coverage, possible enhanced cash value buildup for access later in life, living benefit options are sometimes available.

Cons: Death benefit guarantees are limited to less than lifetime – sometimes substantially less, cash value and often the death benefit are projections determined by index returns and the company determined cap or participation rate, cash values can be severely effected by company’s decision to change internal policy costs, requires ongoing policy owner management.

Whole Life

Though there are many variations, in general this product has a fixed premium for a set period of time, provides guaranteed lifetime coverage AND guaranteed cash value build-up for life, enhanced cash value and a increasing death benefit on projected basis. The death benefit and cash value guarantees usually mean a higher cost than other types of plans. It is a popular offering among Mutual (Participating) companies, but is also available from some Non-PAR companies.

Pros: Lifetime guaranteed death benefit and guaranteed cash value build up, possible enhanced cash value build up and possible increasing death benefit, requires little or no ongoing review and management.

Cons: Required premium is higher than most other types of life plans, premium is generally not as flexible as IUL and traditional universal life plans.

Living Benefits

Welcome to the NEW life insurance! Life insurance with benefits that you don't have to die for. Many permanent plans now include options such as: LTC/Chronic Illness - allows the use of the death benefit to pay for long term care services. Some plans offer it as a lump sum and others pay 2 to 4% of the death benefit out on a monthly basis. In most cases, benefits paid can be used as desired rather than as reimbursement to actual expenses incurred Return of Premium - These riders act as a backstop or off-ramp if the policy owner has a change of heart or the policy does not perform as originally hoped. After 20 to 25 years, depending on the plan, up to 100% of all premiums are available to be returned to the policy owner if coverage is no longer desired. This is a great option if the client is unsure about their long term need for coverage. Longevity Rider - The death benefit protects against an untimely early death, but what if a person lives so long that they run out of money to live? This option allows the insured to access all or part of their death benefit before their death to use as needed. Depending on when they access the money, a discount may be applied to the remaining death benefit. Outliving income is becoming a major concern for those retired and soon to retire. Do not forget to address this concern with your clients.

Final Expense

This is usually a type of whole life plan with a fixed premium and guaranteed coverage for life for amonts of coverage meant to provide for funeral costs and other final expenses – usually between $5,000 and $25,000, but higher amounts are sometimes available. It is underwritten on a non-medical (no exam) basis. Health history is, however, still taken into account and will determine if full coverage will be available immediately or only on a graded benefit basis or declined altogether. If the insured cannot qualify, Guaranteed Issue coverage is available at a higher premium and on a graded benefit basis.

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