Life Insurance

Types of Life Insurance

  • Term Life Insurance: Insurance that provides coverage at a fixed payment rate for a limited period of time.  It provides a death benefit in the event that the individual passes but it has no accumulated cash value or investment component.
  • Whole Life Insurance: Insurance that coverage for the lifetime of the individual at a fixed premium.  On top of the death benefit, a whole life insurance policy has an investment component and accumulates cash value over their lifetime.
  • Universal Life Insurance: Insurance has a cash value that is determined by short-term interest rates rather than the stated long-term rate of a whole life policy.  Premium payments in excess of the cost of insurance are added to the policyholder’s interest-bearing account.
  • Single Premium Whole Life Insurance: Whole Life Insurance: Insurance policy that is paid in full in one lump sum. Provides a guaranteed death benefit and cash value builds quickly because the policy is paid in full.

How is it used?

Generally, life insurance is chosen based on the objectives and needs of the purchaser. Depending on which type you choose, life insurance can be used as an estate planning and wealth transfer tool, as a way to reduce taxes or have them deferred, and/or as a way to replace lost income.