There are two types of life insurance: Permanent and Term.

They are two different types of protection that satisfy many different life insurance needs. Term may be all the life insurance you’ll ever need, or it may be used as an interim step before purchasing permanent insurance. Possibly, a combination of term and permanent in the same policy may be the best solution for you. Your Barrons advisor can show you the strengths of each and their differences.

Permanent Life Insurance

Permanent life insurance – as the name implies – protects you for your lifetime. It can build cash surrender values and provide a death benefit. Some permanent policies pay the policy owner dividends (participating or par), and others don’t (nonparticipating).

There are several types of Permanent life insurance:

Types of Permanent life insurance include Participating Life, Universal Life, Term to 100 and Guaranteed Issue.

Most Term to 100 policies are essentially Permanent Life insurance, and may have guaranteed cash values and are often available with guaranteed limited payment periods. ie: 10, 15 or 20 years.

Participating Life Insurance

Participating life insurance, also called whole life insurance policies provide permanent life insurance protection with a tax-advantaged investment component. In addition, there is potential for earning policy owner dividends. Participating insurance doesn’t require hands-on management by the policy owner. Instead, insurance companies that offer Participating insurance policies manage the assets backing the cash value and the death benefit. 

You can use participating life insurance to:

• Pay final expenses and or any debts.
• Ensure your family has the resources to maintain a comfortable standard of living.
• Pay any taxes owing on your estate so more of your estate is transferred to your children or grandchildren.
• Leave a legacy in your community or with your favorite charity.
• Provide your business with the money necessary to fund a buy-sell agreement.
• Protect your business against the loss of a key employee.

During your lifetime, it can:

• Build tax-advantaged savings that you can draw upon as needed for personal or business opportunities. Any cash values withdrawn from the policy may be subject to tax.
• Supplement your retirement income.
• Provide funds for long-term care or home care.

Features:

• The potential for tax-advantaged growth within the policy without the risk of loss associated with equity markets.
• Protection for your lifetime as long as premiums are paid when due.
• Guaranteed premiums.
• Guaranteed cash values (this amount increases over time and grows on a tax-advantaged basis).
• Guaranteed basic death benefit paid tax free to the named beneficiary.
• Investment performance built for the long term.

Participating insurance is a permanent life insurance product. But the investment performance of the par account is an important component in determining the long-term value of your policy.

A team of professional investment managers invest the assets in the participating account. Assets held in the account include: publicly traded government and corporate bonds, residential and commercial mortgages, corporate lending, real estate, equity-related investments, short-term investments and policy loans.

How participating insurance works

When you purchase participating insurance, the premiums you pay are credited to an account called the participating account with funds from other participating policies. The insurance companies calculate premiums and other basic guaranteed values for these policies using conservative assumptions for death claims, investment returns, expenses (including taxes) and other relevant factors.
 
Insurance companies use conservative assumptions because the guaranteed premiums, guaranteed cash surrender values and guaranteed death benefit are based on these assumptions and are in place for the life of the policy. If the actual results collectively are better than the assumptions supporting the guaranteed values, earnings are generated in the participating account that become part of the participating account surplus (retained earnings). Insurance companies hold a surplus in the participating account to maintain its strength and stability into the future. Each year, insurance companies distribute a portion of the earnings as policy holder dividends.

Dividends

The opportunity to earn policy holder dividends is unique to participating policies.
Dividends are not guaranteed and, will vary upward or downward, depending on future circumstances and dividend scales. A number of variables, including investment returns, mortality experience and expenses (including taxes) affect the dividend scale.
When insurance companies credit dividends to a policy, they have a cash value. This cash value, once credited to the policy, is owned by the policy holder and cannot be reduced or used in any way without the policy holders’ authorization other than to pay premiums. Policy cash values accumulate on a tax-advantaged basis. As cash values accumulate, policy holders can withdraw cash from their policies or borrow against it. Any cash values withdrawn from the policy may be subject to tax.
Policy holder dividends can provide you with considerable flexibility now and in the future. These dividends can be used to buy additional insurance each year on a tax-advantaged basis without proving your insurability at that time. They can also be used to lower your out-of pocket premiums. You choose how it’s used to provide a balance between future growth and affordability.
For more specific information about what life insurance can do for you and how you can benefit from owning a policy, contact Barrons. They can show you ways to tailor your insurance coverage to meet your needs today and in the future.

Universal Life Insurance

Universal life provides permanent life insurance with a tax-advantaged investment component. As cash values accumulate, they can be used to pay part or all of the cost of your insurance or to increase the death benefit. You select an investment mix that is as individual as you are – taking into account the amount of investment risk you are comfortable with, and your financial goals and circumstances. This type of policy is attractive for people who want to actively manage their life insurance policy.

Within limits set out in the contract, you can decide how much or how little you want to pay into the policy. You select an investment mix taking into account the amount of investment risk you’re comfortable with and your financial goals and circumstances.

You can use universal life insurance to:

• Pay final expenses and any debts you may have
• Ensure your family has the resources to maintain a comfortable standard of living
• Pay any taxes owing on your estate so more of your estate is transferred to your children or grandchildren
• Leave a legacy in your community or to your favorite charity
• Provide your business with the money necessary to fund a buy-sell agreement
• Protect your business against the loss of a key employee

 During your lifetime, it can:

• Build tax-advantaged savings which you can draw upon as needed for personal or business opportunities
• Supplement your retirement income
• Provide funds for long-term care or home care

For more specific information about what life insurance can do for you and how you can benefit from owning a policy contact Barrons.  Barrons can show you ways to tailor your insurance coverage to meet your needs today and in the future.

Term to 100 Insurance

Term to 100 is a whole life insurance plan available with a variety of payment options. The policy may include guaranteed cash values and can be fully paid up at end of the selected premium paying period. ie: 10yrs, 15yrs, 20yrs, at age 65 or age 100.

If you select a plan with a guaranteed cash value, these funds are available if you surrender your coverage. The values are not added to the face value of your policy and paid out as the death benefit. In some cases, policy loans may be available.

Guaranteed Issue Life Insurance

This is a form of Permanent Life insurance and is most often available as a Participating Whole Life plan. Most Guaranteed Issue Whole Life plans offer lifetime protection with no medical questions or health exams. The premiums are guaranteed and remain level until the end of the premium payment period at which time the policy becomes fully paid-up. The death benefit and cash surrender values are also typically fully guaranteed.

The maximum issue amount is usually $25,000 and most offerings are subject to some minimums and may adjust the maximum based on the age of the applicant.
Guaranteed Issue Life Insurance is typically available from ages 40 to 80 subject to plan limitations.

Premium payment periods will vary. Some plans are payable for 20 years or to age 85, whichever is earlier, subject to a 10 year minimum, and others are payable for the lifetime of the insured.

For most plans, during the first two years following issue, at death other than by accidental means, there will be a return of the premiums paid.  If death occurs as a result of an accident during the first two years following issue, the face amount will be paid instead of the refund of premiums. In the case of accidental death, a multiple of the face amount may be paid subject to plan design features.

Guaranteed Issue Life Insurance plans may also include a provision for additional benefits to be paid in the event of accidental death. These plans may also include a feature which provides for a cash surrender value and in addition dividends may even be credited to your policy if they are part of your plan design.

To get a quote for Guaranteed Issue Life Insurance and to compare some options currently available in the marketplace check back here soon.

Term Life Insurance

Term life insurance is well suited to meeting high, short-term protection needs for the lowest initial cost. For example, a couple with young children and/or a mortgage might select term insurance as an affordable way to obtain the full coverage they need today. Many term insurance plans do a good job of meeting immediate needs and provide the freedom to later move, or convert to a permanent product without providing proof of health. However, this ability to convert to permanent insurance often expires around age 65 or 70.

When purchasing term insurance, it’s important to understand what conversion options you have. Some companies impose significant restrictions or have a very limited choice of permanent plans for conversion. Many term plans are renewable after five, 10 or 20 years without providing proof of health. During the initial term period, the premium costs will be at their lowest, the price will increase to be appropriate for your age at renewal, and the increase in premium can become substantial in later years. Coverage ceases for the majority of term contracts once you reach the age of 75, 80, or 85 and can even be extended to age 100.

If the insured person dies within the time frame in which the coverage is in effect, the insurance company pays out the face value of the policy. If the insured person lives longer than the period of the policy, the policy terminates and would pay nothing.

Other Types of Term Insurance

Level Term: It is a fixed amount of coverage with premiums that are fixed over a certain time period. Level term usually covers a period ending at age 65, 70, 75 or age 100

Decreasing Term: (also known as creditor insurance or mortgage life insurance)
Most lending institutions offer creditor or mortgage life insurance as part of their lending or mortgage packaging. Its primary purpose is to protect the lender. Creditor or mortgage insurance from a lending institution is generally non-convertible term insurance (you can’t move to a permanent insurance plan if your needs change) – there are no cash surrender values and no premium flexibility. A personal life insurance policy has distinct advantages over typical creditor or mortgage insurance such as:

• you can control the amount of coverage, because it’s not tied to the balance of your loan or mortgage.
• your beneficiaries can choose how to use the funds – to pay off the loan or mortgage, provide a monthly income or take care of other immediate needs. It’s their choice, not the lenders.
• you choose the type of insurance that best suits your needs with premiums to suit your budget – the cost may be lower than creditor or mortgage insurance from a lender.
• you own the policy, not your lender. You have the freedom to switch your loan or mortgage to another lending institution without jeopardizing your life insurance coverage.
• for more reasons to personaly own your mortgadge insurance click here

It pays to compare. Insure yourself, not the lender.