A life insurance policy is a legal contract between you and an insurer, with a variety of policies that are carefully laid out to meet a variety of needs. There are three main types of life insurance policies, Term Life, Universal Life, and Whole Life. We are here to help explain the differences in these policies and help you pick the one that best meets your needs.

Term Life Insurance

This type of insurance policy is designed to cover a specific period of time, during which premiums are paid at a fairly stable and consistent rate. If payments are not maintained, than coverage lapses, but with consistent payments over the term of the insurance (which typical is between 10 and 20 years), protections are put in place. These protections can include.

• Income replacement
• Low cost, fixed premium

During the period of your term insurance policy, the amount of coverage cannot be changed. This means that an additional policy must be purchased if the initial coverage is found to be insufficient. Life expectancy is a critical component in determining the cost of insurance, which can increase with a second policy purchased after the first one has run its course for this reason, as your health will have changed, and your increased age is an additional factor.

Universal Life Insurance

This is a type of permanent life insurance policy that allows for a more flexible premium payment plan and, oftentimes, the ability to change the amount of coverage. However, this also means that the premiums are typically higher than those of term life insurance policies. Here are a few details about Universal Life Insurance

• Lifetime Coverage
• Wealth Transfer
• Income Protection
• Focus on Tax-Deferred Wealth Accumulation

This type of insurance policy, much like whole life insurance, is designed with the flexibility of estate planning in mind. Circumstances can change, and a variable policy can better meet those changes head on. It can focus on long term income replacement, building cash value, and a guaranteed death benefit.

Whole Life Insurance

This is a permanent type of life insurance, much like Universal insurance. For this reason, it comes with higher premiums than term life insurance, but like term life the policy premiums are typically fixed. Unlike term life, whole life comes with a cash value, which can serve as a savings component that can accrue tax-deferred funds over time.

Here are some of the benefits of Whole Life Insurance

• Fixed premiums
• Cash value
• Lifetime coverage
• Tax-deferred proceeds paid to beneficiaries

Much like universal insurance, whole life is geared towards estate planning, which can change from year to year based on any number of factors. It is a low-maintenance insurance policy that offers guaranteed coverage, with only a few exceptions which are clearly illuminated.