There are many different types of life insurance. While you may have a variety of financial, familial and health situations, life insurance policies are designed in several ways to help support many different scenarios. Term insurance and permanent life insurance differ in many ways and can provide different levels of protection to fit your life needs.
Term Life Insurance
Term life insurance provides coverage for a specific time period (10, 20, 30 years, etc.), usually with smaller initial premium payments. It provides you the largest amount of coverage for the dollar when your financial obligations are the greatest.
Term life insurance is a very cost-effective way to provide protection for you, your family, or your business. You decide the length of term you want, and this allows you to set aside a premium amount each month.
Features
- Lower initial premiums, which may fit well into the budget of younger individuals
- Helps ensure that crucial items — like a car or a house — can be paid for in case of early death
- Convertibility: many policies allow you to convert term coverage into permanent insurance once the term is over without additional proof of good health—also known as "evidence of insurability."
- Some term policies offer return of premium (ROP) riders, which return all of the premium you've paid if you are alive at the end of the term period.
Permanent Life Insurance
Permanent life insurance offers a fixed premium for a specific coverage amount. It can give you lifetime coverage—provided that premiums are paid—and build money inside your policy (called "cash value"). There are several types of permanent life insurance, listed below.
Universal Life Insurance
Universal life offers insurance protection until your death, with guaranteed premium levels and tax-deferred benefits that are based on current interest rates.
Features
- Your policy's cash value can be used for a loan, as premium payment or as collateral.1
- Flexibility in terms of premium payment2, conversions and coverage upgrades
Indexed Universal Life Insurance
Indexed universal life (both individual and survivorship) offers all of the benefits of traditional insurance products, plus the potential for additional growth through indexed interest credits. IUL can also offer protection from downside risk from cash value decline from index performance, thanks to to a minimum interest rate guarantee.
Features
- Enhanced potential for cash value growth from a choice of index options
- Upside potential and downside protection
- Additional flexibility features associated with universal life products
