There are two basic types of life insurance, term life insurance and permanent life insurance.
Term life insurance: A term life policy is in force for a specific time and has a face value (coverage amount) that you specify when you buy the policy. In the event that you die within the specified term, the insurance company pays the face value of the policy as a death benefit to your beneficiaries.
Term life insurance is most often sold in -10,-15, -20 and -30 year terms. The premium stays the same throughout the term. If the insured person dies during this period, the beneficiaries receive the proceeds income tax-free. At the end of each term, the insured may renew the policy (generally at a higher cost) up to age 95.
The Advantages and disadvantages of term life insurance
Term life insurance can provide essential protection for your family. It is less expensive than other life insurance options.
The downside of term life insurance is that it isn't a permanent life insurance solution. Once the term ends, the coverage ends or the premiums increase dramatically. And, the older you are, the more expensive it gets.
Fortunately, you can convert many term life insurance policies to a permanent insurance product.
If you want to purchase another policy after your term ends, you may have to show evidence of good health to purchase continued protection. An annual renewable term policy may not require this, but your premiums may increase each year.
Permanent life insurance: A permanent life insurance policy (which includes whole life, universal life and variable life insurance) is in force for your lifetime as long as you continue to make your premium payments. Like term life insurance, permanent life insurance pays a death benefit. But it also has an accumulating cash value.
Whole life is the most common type of permanent life insurance. With whole life insurance, your premium payments remain the same over the life of the policy. You can choose how often you'd like to make premium payments, too – annually, semiannually, quarterly or monthly.
Some whole life policies can be paid up after a certain number of years. When you purchase a policy, you'll know how the cash value will grow over the life of your policy.
Advantages and disadvantages of whole life insurance
There are a number of reasons to consider buying whole life insurance. It's easy to understand, the payments are the same every month, and some whole life policies can be completely paid for after a certain number of years. Because your policy earns a fixed rate of interest, it's easy to predict the growth of your cash value over time.
Whole life insurance is designed for the long-term, so before purchasing, be sure to think about your ability to make premium payments consistently over the life of the policy. While it’s predictable, whole life insurance isn't very flexible. You can't customize it. But, because it’s so predictable and dependable, whole life insurance may be a good option for you.
Universal life insurance provides permanent life insurance protection and access to tax-deferred cash values. We offer two types of universal life insurance, fixed and flexible.
Fixed Premium Universal Life
Fixed premium universal life insurance offers protection, however policy provisions cannot be changed after the policy has been issued.
Flexible Universal Life Insurance
The major advantage of UL is flexibility: you can change the protection level of the policy (within bounds) and you control the amount of frequency of payments (again, within bounds).
This life insurance offers protection for your family and strategies for leaving a legacy to them.
Some other things to know about universal life insurance:
-A flexible premium universal life insurance policy has the flexibility to adjust to your changing needs.
-Your policy's cash value earns interest based on a contractually-stated financial index (or a blend of indices), and this growth is tax-deferred. You can access your cash value almost anytime.
Variable universal life insurance is a life insurance product with investment features. It's designed to help you protect your family’s future with life insurance – and give you access to professionally managed investments that can help you accumulate money for your future needs.
You can use the policy for many of your planned financial needs, such as supplemental retirement planning solutions, business planning solutions, long-term care and education funding.
Advantages and disadvantages of variable life insurance
With a variable universal life policy, you can take advantage of potential market growth because your policy value is invested in underlying sub-accounts which are subject to market fluctuations. Your policy also has the flexibility to adjust to your changing needs.
However, a variable universal life policy puts greater responsibility on you. You assume the investment risk, and you select and monitor your own underlying investment options, instead of the insurance company doing it for you.
Keep in mind that as your life changes (for example, marriage, birth of a child or a job promotion), so will your life insurance needs. Make sure that these strategies and products are suitable for your long-term life insurance needs. Also, make sure you are able to continue premium payments so your policy doesn’t lapse if the market goes down. If you take a loan, withdrawal or partial or whole surrender, your death benefit may be reduced, your policy may lapse or you may face tax consequences.
There are fees and charges for variable life insurance, including a cost of insurance based on characteristics of the insured person such as gender, health and age. There may also be underlying fund charges and expenses, and additional charges for riders that customize a policy to fit your individual needs.
Take the next step
Let the team of experts at Gatta Insurance provide you with a life quote based upon your current needs. Call us for a quote today!