Term Life Insurance provides a cost-effective solution for your temporary life insurance needs and gives you the flexibility to change your policy should your temporary needs turn into permanent goals.
Whole life is also referred to as permanent insurance or ordinary life insurance. Whole life insurance provides financial protection the entire lifetime of the insured , or to age 100.
Premiums remain the same for the life of the insured or as long as premiums are paid. During the early years of the insurance policy the premiums are greater than the amount necessary to pay policy costs. The excess accumulates cash value in the policy to offset increased insurance costs as the insured ages, or to fund the non-forfeiture provisions of the contract .
A universal life policy is an annual term life insurance policy with a side fund that accrues interest. As the cost of the term insurance increases each year, the side fund is used to offset the cost. Properly funded, this allows out-of-pocket premiums to remain level.
The side fund grows based on current interest rates. When rates are high, the side funds does well, when rates are low, the side fund does not grow much.
Eventually, the cost of the term insurance can grow to an amount higher than the premium and money is withdrawn from the side fund to help pay the increased cost of the term insurance. If interest remains low, the side fund may be depleted and the insured will have to increase premiums accordingly or reduce the face amount of the policy.