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The
basic concept of life insurance is to provide coverage for one’s
family or business in the event of death.
Life Insurance Basics
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Term Life
Term life insurance provides protection for a specified period of
time. The face amount (death benefit) of the policy is payable if
the insured dies during the specified period, and nothing is paid
if the insured survives. The most common term periods are 10, 20
and 30 years. Term insurance is the most cost effective way of
providing coverage for a specific period of time.
Whole Life
Whole life insurance is permanent life insurance and provides
protection for life. The premiums for whole life are structured to
remain level over time. Whole life premiums accumulate a cash
value that is dependent on a given insurance company’s investment
performance. Cash value generated in a whole life policy can be
used for: 1. Cash surrender value 2. Loaning money to self 3. Pay
premiums for a given time 4. Supplement retirement income Cash
values may be influenced by a life insurance company’s performance
based on expenses, mortality experience and overall investment
performance.
Universal Life
Universal life insurance is permanent life insurance. As long as
premiums are paid, a death benefit is payable to the
beneficiary. Introduced in 1979, UL was the first variation of
whole life created to offer truly flexible premiums. In UL
contracts some of the investment risk is shifted to the policy
owner because the premium is based on interest rates in excess of
the guaranteed interest rate. This being the case, the policy
owner does not have any option to direct the investment portfolio.
Two additional features of universal life are: (1) The policy
owner’s ability to withdraw part of the cash value and (2) The
choice of a level or increasing death benefit design. Universal
life insurance policies accumulate cash values on a tax-deferred
basis. The cash values are interest-rate sensitive. UL policies
are considered flexible because they provide permanent protection
and accumulate cash values that can be used for emergencies.
Variable
Universal Life
Guide to Variable Universal Life Insurance by ING
The information on
this page is for promotional purposes only, intended as a summary
description of coverages and should not be construed as a policy
of insurance. Please refer to the actual policy forms for the
terms and conditions of coverages. |
