Life Insurance Information 

Life insurance is an essential part of financial planning. The main purpose of purchasing life insurance is to ensure that your dependents are financially protected in the event of death. Life insurance is a way to plan for the future so you need to be sure that the coverage you purchase fits your needs.

There are many options available to you when purchasing life insurance. Some policies provide coverage for your lifetime and others provide coverage for a specific number of years. With certain policies, you are able to combine different kinds of insurance and even build up your cash value. Your choice should be based on your needs and what you can afford.

Term Life Insurance

Term life insurance is an insurance policy that is in effect for a specific period of time. If the insured dies within that timeframe, the beneficiary of the policy receives the death payment. However, if the insured survives that period of time, the beneficiary receives nothing and the policy is closed. Term life also provides the ability to convert to a permanent kind of coverage at a later time. The main reasons people buy term life insurance include:

• Coverage for a specific amount of time until they are able to build up their assets.
• Coverage for the amount of time the mortgage is for so in the event of an untimely death, the mortgage is paid off.
• Coverage for those that cannot afford a permanent policy, especially newlyweds and new parents.

Permanent Life Insurance

Permanent life insurance covers a longer period of time than term life or for the entire life of the insured. This kind of insurance combines death benefits with a savings component. The amount of money that is not used to cover the amount of the insurance is invested by the company and builds up a cash value that may be used in a variety of ways. There are several types of permanent life insurance, including whole, universal, variable universal, and survivorship universal.

Whole Life Insurance
A whole life insurance policy remains in full force and effect for the life of the insured, with premium payments being made for the same period. Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher since the premium payments are made during a shorter period of time.

Variable Life Insurance
Variable life insurance is an investment-oriented whole life insurance policy that provides a return linked to an underlying portfolio of securities. The portfolio is a group of mutual funds including common stocks, bond funds, and money market funds. This type of life insurance offers fixed premiums and a minimum death benefit. The better the total return on the investment portfolio, the higher the death benefit or value of the variable life policy.

Variable Universal Life Insurance
Variable universal life insurance is a combination of universal life insurance and variable life insurance in that excess interest credited to the cash value account depends on investment results of separate accounts (equities, bonds, real estate, etc.). You have a choice as to how the cash value is invested -- stock and bond mutual funds. However, there is no guaranteed minimum interest rate with a universal life insurance policy.

Universal Life Insurance
The premiums of a universal life insurance policy are split in two ways. The premium you pay goes toward covering the cost of the insurance policy and the remaining balance is invested and earns interest on a tax deferred basis. With this type of life insurance you also receive a guaranteed minimum interest rate on the balance that is invested.

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